The South African Reserve Bank has been mostly successful in keeping inflation within this range as the latest figures show it to be at 5.5%. However, it has gradually been increasing over the passing years due to the catastrophic economic climate.
Just as the Bank of England is clearly the central bank of England, so the South African Reserve Bank is the central bank of South Africa. Consequently, they have the power and responsibility to perform certain functions that will determine the success of the economy. For example, besides issuing bank notes and overseeing the banking system, they must set monetary, fiscal and trade policies, which is linked to the issue of inflation. Their decisions directly affect all citizens of South Africa and especially the industries and businesses there.
It was in 1998 that the, then current, governor of the South African Reserve Bank decided it would be more effective to introduce inflation targets rather than money supply targets. He reasoned that the money supply was annually increasing at a rate higher than originally predicted, yet inflation was consistently decreasing which contradicted what had been forecasted. Consequently, focus was centered upon controlling inflation and formal targets set in place to ensure that they were not deviated from, as they had been in previous years.
It initially appeared to be extremely successful and inflation rates were dropping faster than before and reaching an all time low of 4.3% in 2010. However, 2011 result show that, though inflation remains within the target, it has slowly begin to increase again and is now at approximately 5.5%. Unless policies are set in place to rectify any problems, they may fail to achieve their targets.
- The South African Reserve Bank
Just as the Bank of England is clearly the central bank of England, so the South African Reserve Bank is the central bank of South Africa. Consequently, they have the power and responsibility to perform certain functions that will determine the success of the economy. For example, besides issuing bank notes and overseeing the banking system, they must set monetary, fiscal and trade policies, which is linked to the issue of inflation. Their decisions directly affect all citizens of South Africa and especially the industries and businesses there.
- Inflation targets
It was in 1998 that the, then current, governor of the South African Reserve Bank decided it would be more effective to introduce inflation targets rather than money supply targets. He reasoned that the money supply was annually increasing at a rate higher than originally predicted, yet inflation was consistently decreasing which contradicted what had been forecasted. Consequently, focus was centered upon controlling inflation and formal targets set in place to ensure that they were not deviated from, as they had been in previous years.
It initially appeared to be extremely successful and inflation rates were dropping faster than before and reaching an all time low of 4.3% in 2010. However, 2011 result show that, though inflation remains within the target, it has slowly begin to increase again and is now at approximately 5.5%. Unless policies are set in place to rectify any problems, they may fail to achieve their targets.