MTBPS: Godongwana says his hand wasn't forced to lower inflation rate

Minister of Finance Enoch Godongwana said his hand was not forced to lower the inflation rate during his Medium-Term Budget Policy Statement (MTBPS), despite an increasing campaign from the central bank.

Godongwana made the announcement on Wednesday before Parliament.

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While some may have expected him to only make it when tabling the 2026 budget in February, he told journalists during a media briefing that he believed the time was right.

He also told Parliament he believes the long-term benefits will outweigh the short-term concerns.

While the South African Reserve Bank (SARB) has for several years been making an ever-stronger case to pin the interest inflation rate on the lower end of the National Treasury’s 3% to 6% spectrum, Godongwana has dismissed claims that he’s been reluctant to do so.

Godongwana said he’s now satisfied that enough analysis has been done to take the bold step, adding that he saw no reason to delay the decision until 2026.

“Of course, we have to take into account the fluctuations, and there may be smaller shocks in the economy; it may not necessarily be a linear 3%.”

Meanwhile, SARB Governor Lesetja Kganyago said he does not view the decision as a win for the bank.

“There’s no vindication. There’s only one winner here today. It’s the South Africans who are now going to enjoy a low inflation economy.”

Kganyago said over the next two years, the 3% target could lead to at least five interest rate cuts of 25 basis points each, depending on several factors considered by the SARB's Monetary Policy Committee.

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