South Africa will continue to implement inflation targeting and the policy could not be blamed for the 900 000 jobs that were lost during the recession South African Reserve Bank (SARB) Governor Gill Marcus said on Thursday.

She said that the number of jobs lost in South Africa during the recession was disproportionate, even when taking into account global impacts.

"We have to ask ourselves, why was South Africa prepared to loose so many jobs, even though it was not really justifiable. In essence, the country did not experience a banking failure.

"This often brings up the debate around macro-economic policy, maybe because it just seems like an easier system to manage. However, macro economic policy is not a silver bullet to change all the answers."

Speaking at the Centre for Education in Economic and Finance investment leadership banquet, which Engineering News Online attended, Marcus said that structural problems, such as the high unemployment rate and education skills deficit, had to be addressed.

"We cannot expect monetary policy to solve what is essentially a structural unemployment problem in the country."

The Congress of South African Trade Unions wants policymakers to scrap the 3% to 6% inflation target, arguing that it will lead to higher economic growth and job creation.

Marcus said that the SARB would continue to implement inflation targeting in a flexible manner.

She explained that this meant that while the bank's primary objective would remain to be the containment of inflation, it was not limited to the exclusion of factors such as growth and employment.

Nevertheless, the SARB did not plan to change its targeting band of between 3% to 6% inflation in the near future.

"Changing the inflationary band is not the issue, we need to anchor inflation expectations and create a trajectory of a downwards expectation."

Marcus admitted that the SARB was facing difficult challenges in ensuring that inflation remained under control, while still allowing for the continued recovery of the fragile domestic economy.

"We believe that the domestic economy would remain relatively constrained for some time by elevated household debt levels, high levels of unemployment and the fact that credit extension by banks remains very subdued.

"Private sector investment expenditure is expected to lag that of the public sector, particularly if domestic consumption expenditure remains under pressure.

"Despite the more positive growth outlook, employment is expected to lag somewhat."

Marcus said that a decline in the risks to the inflation outlook, owing the persistent strength of the rand exchange rate and increased certainty with regard to the electricity price increases granted to State-owned power utility Eskom, allowed the SARB to reduce the repurchase rate by 50 basis points at the most recent meeting of the Monetary Policy Committee.

However, Marcus noted that a further reduction would not be expected in the near future and added that it was expected that the rate would remain stable for sometime, but emphasised that it was not an unconditional commitment.

The SARB's current forecast for domestic growth is an average of around 2,6% in 2010 and around 3,5% in 2011.