Monetary Policy in South Africa: From 1994 to now

Policy Paper 39 The evolution of South Africa’s monetary policy over the past three decades has demonstrated its ability to manage both external shocks and domestic economic volatility. The adoption of inflation targeting and the South African Reserve Bank’s (SARB) role as a “credibility provider of last resort” have shaped monetary policy in response to the country’s structural uncertainties. This paper reviews the trajectory of South African monetary policy from 1994 to the present, outlining key policy shifts, challenges, and outcomes. Monetary policy has a risk management function that is as important as its traditional monetary policy role. The evolution of the country monetary-fiscal policy framework should favour a reduction of long term inflation, and a reduction in the country risk to support an increase in productivity and a reduction in the economy cost-base. Keywords: Monetary policy, inflation targeting, South African Reserve Bank, credibility, structural reform