South Africa’s 3% inflation goal is robust, central bank study shows

South Africa’s 3% inflation target can withstand a range of economic shocks as expectations have become better anchored and more forward-looking, the central bank said in a new study.

In the absence of major shocks, there’s a 78% chance that inflation will remain between the central bank’s 2% and 4% tolerance band, authors Theo Janse van Rensburg, Jeffrey Rakgalakane and Rudi Steinbach said in an economic note published late Tuesday.

South Africa formally lowered its inflation target to 3% in November with a 1 percentage point tolerance band, replacing the 3% to 6% range that had been in place for 25 years.

The central bank had aimed for the band’s 4.5% midpoint since 2017.

Since the outbreak of the Iran war on February. 28, the nation has faced mounting price pressures. Restrictions on traffic through the Strait of Hormuz, a key global supply route, has pushed up oil and fertiliser