The Inflation Target

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How the SARB decided to push for a lower inflation target to 3% flat

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00:00 - 00:05So, we're at the MPC meeting, right?
00:05 - 00:07Lesetja walks in
00:07 - 00:10He says, "Guys, I've been thinking..."
00:11 - 00:16"People are laughing at our 3–6% inflation target."
00:17 - 00:21"It's too wide!" he exclaims.
00:21 - 00:24"Too wide!"
00:29 - 00:31"And too high!"
00:31 - 00:34"Other central banks are mocking us!"
00:38 - 00:40"Mocking us!"
00:41 - 00:47He wants to narrow it down.
00:47 - 00:50He wants to lower it!
00:50 - 00:56Maybe aim for 3% flat.
00:58 - 00:59Three percent!
00:59 - 01:01Flat!
01:04 - 01:06No band!
01:06 - 01:08No tolerance!
01:13 - 01:14So
01:14 - 01:16So I ask
01:16 - 01:20"Won't that spike real yields?"
01:21 - 01:27He shrugs, "That's Treasury's problem."
01:35 - 01:36"Let them deal with the debt implications," he says.
01:36 - 01:39"We need credibility!"
01:41 - 01:44I say, "But Lesetja"
01:44 - 01:47"Won't everyone object?"
01:47 - 01:49He smiles
01:50 - 01:53"We'll produce a document."
01:54 - 01:56"It'll say..."
01:56 - 01:58"..lowering the target lets us cut rates..."
01:58 - 02:02Just like that - "Cut rates!"
02:05 - 02:07Cut!
02:10 - 02:11And then he says
02:11 - 02:13He says
02:15 - 02:17"It will boost growth"
02:17 - 02:20"and reduce our debt"
02:21 - 02:28"Rating agencies will love it."
02:29 - 02:30Really?
02:30 - 02:32Yes - they'll buy it!
02:36 - 02:39"Everyone will issue supportive statements."
02:40 - 02:42"Then Treasury can't say no."
02:50 - 02:55I ask, "But what if inflation doesn't fall as expected?"
02:56 - 02:58Yes, an obvious question...
02:58 - 03:04Yes, so he looks angry and replies
03:04 - 03:09"Then we'll hike rates to maintain credibility."
03:09 - 03:11Can't make this up
03:16 - 03:20"We'll show everyone what the SARB is all about."
03:23 - 03:26"Discipline and commitment!"
03:31 - 03:36"Let's make this happen - Meeting adjourned!"