Briefing Note 1: Why inflation targeting does not work in a highly unequal country

Briefing Note 1: Why inflation targeting does not work in a highly unequal country Saul Levin The inflation targeting approach by the South African Reserve Bank (SARB) and its recent increase of 0.5% has seen interest rates more than double when compared to the first quarter of 2022. [...] The problem comes in the disproportionate role the top 10% of income earners in South Africa play in driving economic growth and employment creation. [...] A squeeze on the disposable incomes of the top 10% may well see many in this group reducing spending on luxury goods, an intended effect of high interest rates. [...] Further, this top decile is 50% more likely to derive income from a business than those in the 70th to 90th percentile, and three times more likely than those in the bottom 50% of income earners. [...] THE REAL ECONOMY BULLETIN [Grab your reader’s attention with a great quote from the document or use this space to emphasize Not being able to access the labour market is a core driver of inequality in South Africa – this is further exacerbated by slow growth.