South Africa Finance Minister Denies Plan Lower Inflation Target Amid Central Bank Move

South Africa's central bank, led by Governor Lesetja Kganyago, has announced its preference to lower the inflation target from the current 3%-6% range to 3%, citing the existing target band as too wide and harmful to the country's economic competitiveness. This decision, made without the formal approval of Finance Minister Enoch Godongwana, has sparked concerns over policy cohesion, as the inflation target is ultimately set by the Finance Minister in consultation with the Cabinet. Godongwana has clarified that there are no immediate plans to officially lower the inflation target and emphasized that any changes must follow a comprehensive consultation process involving the National Treasury, the Reserve Bank, Cabinet, and other stakeholders. Despite the disagreement, markets reacted positively to the central bank's announcement, with South African government bond yields falling to five-year lows and expectations of long-term benefits in anchoring inflation. Analysts view the move as a significant macroeconomic positive that could reduce borrowing costs by lowering the risk premium, though short-term economic risks remain amid external pressures such as potential tariffs from the U.S. The situation highlights the tensions between the central bank's independent monetary policy stance and the government's role in formalizing inflation targets.