These developments, however, impinged on the credibility of the continued use of M3 as the intermediate target of monetary policy in South Africa, and opened up the way for unreasonable criticism of monetary policy decisions taken by the Reserve Bank.
After more than four years of a persistent “excessive” growth in M3, with a clear downward trend in inflation at the same time, the question has arisen whether the time has not come for South Africa to follow the example set by many other countries and to switch from a money supply anchor for monetary policy to a more direct targeting of the ultimate goal, that is, inflation in its own right.