Marcus leaving at a time of stagflation

After five years at the helm, Reserve Bank Governor Gill Marcus is stepping down.

Shortly after the announcement, markets conveyed ambivalent messages. The rand exchange rate dipped as low as R11.10 against the dollar from R11.04, but recovered some lost ground in later trading. The rand hovering close to a psychological band signals tough times ahead.

Evidently Marcus has lost the battle against targeting inflation. The legacy she leaves is an economy in a state of stagflation, with dire consequences for the balance of payments deficit.

Unless there is a paradigm shift and a radical review of the current band of inflation targeting, the endemic crisis in macroeconomic policy will persist and deepen.

The new governor of the Reserve Bank should transform this window of opportunity into a window of effectiveness. Accordingly, a new inflation band should be a target range of 3%-9%.

The new range will propel the economy into a growth trajectory that is aligned with government's infrastructure growth programme.