Do measures of inflation pressure suggest inflation will keep rising in South Africa? In today’s post we compare three measures – the proportion of CPI components increasing by more than the inflation target (Diffusion Index), Codera’s inflation pressure measure that captures inflation dispersion, and Morgan Stanley’s inflation shock momentum measure. The first two measures have been rising over recent months. We show in today’s post by Oliver Guest that the Diffusion Index has historically had the highest correlation with headline inflation, and the Diffusion Index and Morgan Stanley measure in particular have high correlations with future headline inflation.
