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Working Paper 189 - An Empirical Investigation of the Taylor Curve in South Africa
Against the backdrop of heightened uncertainty and anaemic growth following the financial crisis and the ongoing euro area sovereign debt crisis, expectations about the role that monetary should play in trying to stimulate growth have been raised. At the same time, the domestic economy has been subject to a number of severe supply-side shocks and the output gap remains negative and wide. Inflation has breached the upper limit (6 per cent) of the target band, albeit for short periods, and the forecast remains persistent towards the upper limit of the target range. Inflation expectations remain marginally above the target band at 6,1 per cent until 2015. The Monetary Policy Committee (MPC) has been facing tough choices as it tries to support the hesitant recovery and bring inflation to well within the target range.