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COSATU has welcomed Finance Minister Pravin Gordhan's "commitment to address the South African Reserve Bank's inflation targeting policy when he unveils the national budget" later this month.
Gordhan made the statement during a radio show yesterday but did not say if the announcement would be the government's proposal or changes to the policy already agreed with the bank.
The ANC's labour union, Cosatu, and communist allies want the Reserve Bank's mandate broadened, saying it is currently too focused on controlling inflation, leading to relatively high interest rates they say have worsened the plight of the poor.
The ANC agreed with its leftist allies last year to review the mandate of the central bank and possibly widen it to include job and economic growth indicators.
Cosatu spokesperson Patrick Craven said in a statement yesterday: "Cosatu ... welcomes Gordhan's assurance that employment creation is still "a major concern" and looks forward to seeing this concern turned into fresh job-creating monetary policies, including a big cut in the repo rate to give an incentive to investment, a stimulus to economic growth and job creation and a lifeline to workers facing possible retrenchment."
Nearly one million jobs were shed during South Africa's recession last year, the first in nearly two decades.
The National Treasury said last week it had decided to assess the effectiveness of inflation targeting with the central bank.
"We are talking, working, thinking, reflecting, interacting with the key stakeholders from within the government and listening to the voices from outside and will inform South Africa where we intend to go on February 17," Gordhan said in a radio interview yesterday, referring to the budget date.
Chris Hart, Investment Solutions economist said those calling for inflation targeting should also be more careful not to create a situation similar to the US where the central bank is in charge of both the inflation control and exchange rate.
"The primary focus point should be maintaining the stability of the financial system, and in this regard inflation targeting is a side bar and not the main activity of the bank".
Efficient Group economist Dawie Roodt said it was "unlikely" that the minister would make more changes on inflation targeting without proper public debate.
Gordhan reiterated that the independence and mandate of the central bank remained enshrined in the constitution, despite reports that the ANC has called for the nationalisation of the institution.