Definition of price stability
Price stability refers to a steady, low inflation environment
where general price levels do not fluctuate sharply. It avoids
high inflation and deflation. Stable prices help households and
businesses make reliable decisions—savers maintain
purchasing power, borrowers face predictable costs, and
central banks can manage economic policy effectively.
, How price stability is measured
Measured using inflation indices:
• Consumer Price Index (CPI): tracks price changes
in a basket of goods/services.
• Core CPI: excludes food and energy to reveal
underlying trends.
Central banks set target ranges. For example, the
South African Reserve Bank aims for 3-6% inflation,
with a 4.5% midpoint. Year-on-year CPI changes are
monitored to ensure stability.
Price stability refers to a steady, low inflation environment
where general price levels do not fluctuate sharply. It avoids
high inflation and deflation. Stable prices help households and
businesses make reliable decisions—savers maintain
purchasing power, borrowers face predictable costs, and
central banks can manage economic policy effectively.
, How price stability is measured
Measured using inflation indices:
• Consumer Price Index (CPI): tracks price changes
in a basket of goods/services.
• Core CPI: excludes food and energy to reveal
underlying trends.
Central banks set target ranges. For example, the
South African Reserve Bank aims for 3-6% inflation,
with a 4.5% midpoint. Year-on-year CPI changes are
monitored to ensure stability.
