The South African Reserve Bank has constructed a new inflation measure to monitor underlying price developments that will help support monetary policy decision making.
Supercore inflation is made up of core price growth components that are more likely to be triggered by general economic conditions as measured by the output gap and show high 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.
The measure will assist policymakers to distinguish short-lived inflationary pressures from those showing more persistent trends, the authors said. It will also be used alongside headline and core inflation, which strips out food and non-alcoholic beverages, fuel and energy prices.
"Broadening the suite of measures for assessing underlying price pressures enhances robustness and confidence of correctly pinning down the persistent inflationary dynamics given the uncertainty around any single such measure," the authors said. This is crucial for the formulation of monetary policy, they said.
Newsletter Daily SA Money Daily The biggest business, economic and market news of the day.
