Monetary policy cannot contribute directly to economic growth and employment creation in the long run. However, by creating a stable financial environment, monetary policy fulfils an important precondition for the attainment of economic development. A formal inflation-targeting framework makes this clear and communicates exactly what is intended to the public.
Much has been debated about who should set and announce an inflation target. There are different practices in different countries but the norm tends to be that a monetary authority, which can be either the central bank or an elected government, chooses and publicises a target goal for an inflation rate for a defined period. In some cases, the central bank and the government jointly announce the inflation target.
In South Africa, the inflation targets are set by the government after consultation with the Bank.