The Four Characteristics Of Inflation In South Africa

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When clarifying inflation, it is important to highlight the four characteristics of this term. It is a neutral definition which does not define inflation in terms of its detailed causes. Another important component is that it clarifies inflation as an on-going process. As the term is defined as a “continuous” rise in prices which means we are expecting an increase in inflation each year. Inflation is concerned with a considerable increase in prices. Inflation refers to an increase in prices in general. Since inflation is continuous and considerable increase in the general price level, it is important to take into attention the measurements of inflation which are: 1. The consumer price index-is an index of the prices of a representative basket of consumer goods and services. It thus characterises the cost of the shopping basket of goods and services of a typical or average South Africa 2. Core inflation-Statistics SA subsidized by publishing the core inflation rate in South Africa .When calculating core inflation you exclude all the CPI basket items as they are affected by government involvement. 3. The CPIX-In this concept, the interest rates are omitted as the” X” shows that. This is because the CPIX does not reflect the increases in the repo rate. 4. The production price index-Measures prices at the level of the first significant commercial transaction. This simply means that all connections that are made are restrained immediately. As stated before, inflation has its own
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