The Reserve Bank’s decision to lower its effective inflation target last week has elicited intense backlash from certain sources within government, most notably the Finance Ministry. It highlights the tussle going on within the ANC between pursuing policies aimed at appeasing markets as opposed to those aimed at satisfying the tripartite factions, who argue that the downward revision of the inflation target is a capitalist ploy to contain wage increases. The Reserve Bank’s move also places pressure on the fiscal authorities to restrict the magnitude of inflation-linked increases in government expenditure. Despite these fissures, we still believe the Reserve Bank might have executed an ingenious method of cajoling wage and price increases to lower levels that will succeed in reducing the longer-term inflation rate that brings down interest rates more steeply. For those who argue that this will not help lift economic growth, the fact is that such an outcome depends on other key structural changes in the way in which the economy is managed