When faced with a relative price shock, monetary authorities often aim to contain its second round effects on inflation … while accepting first round effects. We analyze the experience of South Africa and other inflation targeters to explore … whether and when this policy prescription implies changing the monetary policy stance. Inflation targeting central banks …

in setting interest rates using quarterly data, covering the period since inflation targeting was formally adopted in … 2000. The classic Taylor rule is modified to determine whether the South African Reserve Bank takes into account inflation … Reserve Bank's policy rate decisions respond to expected inflation (rather than current inflation), and its relationship to …