JOHANNESBURG - The South African Reserve Bank SARB has taken its revised inflation target down to 3, on the lower end of its inflation target band of 3 and 6.
The unexpected decision was taken during the monetary policy committee's MPC fourth meeting this week to deliberate on the policy rates.
After dropping the repo rate by 25 basis points to 7, the MPC has now also adopted a new target.
While a case for a lower inflation target has been made for a few years now, calls for a revision have recently picked up momentum.
Having adopted its 3 to 6 range in 2000, the central bank has since 2017 preferred to target inflation at the midpoint of 4.5 of that range.
The reserve bank has repeatedly admitted that the existing 3-6 target is too high and too wide, with the MPC again considering a scenario with an inflation objective on the lower end and not the midpoint during its previous meeting.
Reserve Bank Governor Lesetja Kganyago said the lower inflation was likely to reduce the economys average interest rate over time, bringing borrowing costs down.