To support monetary policy decision making, South African Reserve Bank has constructed a new inflation measure to monitor underlying prices.

In order to distinguish short-term inflationary pressures from those that are more persistent, this measure is unique and will provide policymakers with a better insight into inflationary fluctuations with headline and core inflation.

Authors said “Expanding the set of measures to assess underlying price pressures increases the robustness and confidence in correctly determining persistent inflation dynamics given the uncertainty surrounding any such measure”. It is crucial for the formulation of monetary policy.

As we know, super-core inflation consists of an increase in the basic prices of goods caused by the general economic conditions of production, which shows sensitivity to the business cycle, authors including Samantha de Kock, MG Ferreira and Mpho Rapapali said in a central bank economic note published on Friday.

Given that inflationary pressures are in this instance driven by balanced demand, headline inflation is still above the midpoint of the 3% to 6% range. While the super-core inflation has hovered around the middle in recent months.

This way of monitoring inflation could help monetary policy in reducing borrowing costs at the end of September. The Central Bank sees a decrease in inflation to 4.3% in the last quarter of this year.

“The key interest rate is at a 15-year peak of 8.25% from mid-2023 and the MPC has said it will only change course once inflation is held at the midpoint.”

A large number of economists as well as citizens in the Republic of South Africa are of the opinion that the reduction of inflation should have happened much earlier.