Answer to Question #309003 in Macroeconomics for Jackey

Question

What do you think is the most important indicator in the current targeting approach of inflation followed by the South African Reserve Bank (SARB)? How does the SARB monitor this indicator?

Answer 1

I think that the most important indicator, in this case, is the interest rates.

The SARB uses the interest rates to influence the level of inflation. The national treasury consults with the SARB to set the inflation target. This in turn acts as a benchmark against which price stability is measured. Afterward, the SARB makes monetary policies independently aiming to achieve the set targets.