The consumer price index in South Africa covers approximately 1500 goods and services. A mistake in one component, housing rental, soon compounded to a sizeable deviation. For March 2003, the CPIX inflation measure targeted by the South African Reserve Bank was revised to 9,3 per cent, compared to the 11,2 per cent published originally.
This example amply illustrates the potential consequences of incorrect information on monetary policy decisions. The appropriate stance of monetary policy is often judged by considering developments in indicators such as the real interest rate, the slope of the yield curve, the output gap, the natural rate of interest and the natural rate of unemployment.