Marcus says CPI targets reduce price pressure

PRETORIA (Reuters) – South Africa's central bank defended its inflation targeting policy on Thursday, saying it had helped reduce price pressures and contributed to more favourable economic growth.

Governor Gill Marcus, whose five year term in office will end on Nov. 8, told a conference on inflation targeting that raising its band from the current 3-6 percent would probably push CPI higher.

The Reserve Bank has raised interest rates by a cumulative 75 basis points this year, as it balanced worries about inflation pushing above its target and concerns over weak growth in Africa's most advanced economy.

"We have adopted a flexible inflation targeting approach, conscious of the trade-off between short-term inflation variability and output variability," Marcus said.

"This approach has been appropriate both in dealing with exogenous shocks, as well as responding to periods of slow growth, as is currently the case."

South Africa's COSATU labour federation has long called for the government to scrap inflation targeting, saying it has led to higher interest rates, undermining efforts to grow the economy and create more jobs.

"This animosity is problematic, as societal buy-in and public support are considered to be important

prerequisites for the successful implementation of the framework," Marcus said on Thursday.