Comparing the causes of inflation

Over the last few days the economic news has been dominated by the story of inflation in the US and the 75 basis point increase in their interest rate. Interestingly, their so-called “benchmark” rate stands at 1.5-1.75%, much lower than our 4.75% repo rate. In the weekend's newspapers, economists explained how the increase could affect South Africa. Most believe that the Reserve Bank has room for manoeuvre and does not have to act as aggressively against inflation as the US Fed. To test whether this argument is sound, one can compare the causes of inflation in the US and South Africa. * The Economics Minute is supported by the NWU Business School.