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New Reserve Bank measures that will impact interest rates

25 Apr 2024
Author: Neil Helps

New Reserve Bank measures that will impact interest rates

The South African Reserve Bank has introduced two new measures. These measures aim to understand the price pressures that will affect the MPC's interest rate decisions. Both measures show high levels at the moment. Both measures currently indicate high levels.

Witness Simbanegavi, the editor of the SARB’s biannual Monetary Policy Review, said a supercore measure plus a gauge dubbed the “persistent and common component of inflation” will be used alongside headline and core price growth published by Statistics South Africa as additional tools to inform monetary policy.

The PCCI is higher than core inflation, which stood at 4.9% last month.

According to the review, this mainly reflects the below-average post-pandemic housing and medical aid inflation.

The supercore measure indicates that inflation pressures have increased as the economy has bounced back from the COVID-19 pandemic. In recent months, outcomes have been slightly above the target midpoint.

The report stated that there are risks to underlying inflation. These risks include expectations of price growth, the normalization of health insurance and rental housing inflation, and currency weakness.

Since May 2021, South African inflation has been above the central bank's target range midpoint of 4.5%. The central bank uses this midpoint to anchor expectations.

Since May, the MPC has maintained the standard interest rate at 8.25% in an attempt to achieve its target.

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