This week the monetary policy committee (MPC) of the Reserve Bank meets to consider the monetary policy stance and level of the repo rate. One of the most important economic indicators for its decision is the rate of inflation. The primary indicator used to measure inflation is the consumer price index (CPI) published by Stats SA. Changes in the CPI are used as the basis for the Bank’s inflation target policy.

SA has an inflation target of 3%-6% per annum, and the central bank aims to keep the rate of inflation within this target range. If the rate of inflation accelerates with a danger of exceeding 6% for a sustained period, the Bank will increase interest rates. Conversely, if the rate drops towards or below 3% on a sustained basis, interest rates will decline...

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