The consumer price index (CPI) has for May 2022 hit 6.5% — from 5.9% in April and 5.2% in May last year. CPI is a measure of the average change overtime in the prices paid by urban consumers for a market basket of consumer goods and services. The prices of consumer goods and services should increase slowly on a year-to-year basis.
The basket encompasses 12 categories of consumer expenses such as: (1) Food and non-alcoholic beverages, (2) Alcoholic beverages and tobacco, (3) Clothing and footwear, (4) Housing and utilities, (5) Household contents, (6) Equipment and maintenance, (7) Health, (8) Transport, (9) Communication, (10) Recreation and culture, Education, (11) Restaurants and hotels and (12) Miscellaneous goods and services, including insurance and financial services.
A high CPI implies general expenses of what consumer buy would be increasing. The South African Reserve Bank uses interest rates to discourage spending. The theory is that consumers will not spend if interest are higher due to less money to spend.
Economics and Finance SA 