Manuel: Inflation tamed in '09

Manuel said it would be "some time" before interest rates come down but warned, however, against ditching inflation targeting saying its adoption in 2000 was neither accident nor fashion statement.

Speaking in Parliament during his budget vote speech Manuel made these comments on the back of calls by the ANC's alliance partners, Cosatu and the SACP for government's inflation targeting to be scrapped or adjusted.

Manuel's says: "It (inflation targeting) was introduced against the backdrop of interest rate increases of seven percentage points in 1998, some of which was occasioned by global factors and some by domestic circumstances arising from the absence of an anchor for monetary policy."

Manuel says he fully concurs with Reserve Bank Governor Tito Mboweni who argues that the bank's constitutional mandate is to maintain low inflation.

"Against that backdrop, I know that if our monetary policy was not anchored, interest rate increases would both be considerably higher and less understood.

"Keeping inflation low is a policy stance pursued to ensure that, as a country, we remain competitive but more importantly, that inflation does not erode the earnings and savings of the poor, those least able to protect themselves against rising prices," added Manuel who also stressed that if the country was serious about remaining competitive, increasing employment, reducing poverty and raising investment, controlling inflation was the way to go.

- Fin24.com