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Getting it straight on inflation

THERE is much confused thinking on the subject of inflation; let us try to get it straight.


The current rate of annual inflation is about 100%, not 600% as is com

monly assumed.

Monthly rate of inflation has been of the order of 6% for the last two months for which figures have been released. Compounded over 12 months, this gives the current annual rate of 100%.

The figure of about 600% is the year-on-year inflation for the last 12 months; it is a measure of past, not current inflation.

If the monthly rate of inflation stays at 6% for the remainder of the year, it will certainly show a value of under 200% for year-on-year inflation by December, as targeted by the Reserve Bank. And this will be 100% by early next year.

However, if price increases, wage demands and forward business budget forecasts are based on the past inflation rate of 600% instead of the current rate of 100%, high rates of inflation will be self-perpetuating and stability will not be achieved.


TC Kabell,

Marlborough.

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