CPI and real inflation are different animals

Published Aug 18, 2014

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I READ with interest the report “Wage increase outlook is worrying – Mminele” (Business Report, August 14). I cannot recall the Reserve Bank’s primary mandate ever being anything else than inflation targeting – keeping inflation between 3 percent and 6 percent a year.

I have never doubted that the best experts and statisticians in South Africa are employed at the Reserve Bank to constantly monitor inflation and make predictions.

Inflation touches almost every aspect of my life, yet I am no economic expert or statistician.

Herein lies the rub – I (and from what I read, many others – for example, striking workers demanding double-digit wage increases) have for years absolutely ignored the official consumer price index (CPI – the Reserve Bank’s technical speak for inflation) figure, as it does not come close to my personal experience.

Every month my shopping basket is emptier, yet the expense is higher. Every year I see double-digit increases in the big-price items (cars, houses and so on) officially announced.

The only conclusion left to me regarding the difference between the “official CPI” and inflation as I experience it is that the Reserve Bank is not free to calculate or announce the actual inflation rate.

Jan van der Merwe

Sandton

Experts should assign blame for Abil failure

I am intrigued by Pierre Heistein’s article (“SA Reserve Bank jumps in to deter capital flight”, Business Report, August 14) and the “smart decision-making” that he explains to protect “the market”.

Neither he nor any of the other commentators I have read indicate any agency for explaining the crisis. Who gained from this risky venture? Why does the government allow such events to occur? Why is taxpayer money, badly needed for a multitude of social projects, being used to bail out a bad bank? Is nobody guilty of misconduct?

We hear nothing of responsibility for this state of affairs.

Perhaps some of our economists can explain to a non-economist.

Peter Kallaway

School of Education, UCT

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