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The South African Reserve Bank has developed two new measures to better understand underlying price pressures and both currently show elevated readings.

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, said Witness Simbanegavi, the editor of the SARB’s biannual Monetary Policy Review.

The PCCI is higher than core inflation, which stood at 4.9% last month, mainly reflecting the below-average post-pandemic housing inflation and medical aid inflation, according to the review. The supercore measure also shows that inflation pressures have risen as the economy recovered from the Covid-19 pandemic, with outcomes hovering slightly above the target midpoint in recent months.

Risks to underlying inflation include price growth expectations, the normalization of health insurance and rental housing inflation and currency weakness, the report said.

South African inflation has been above the 4.5% midpoint of the central bank’s target range where it prefers to anchor expectations since May 2021. The MPC has left the benchmark interest rate at 8.25% since May in a bid to return it to that goal.

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