Abstract: | The inflation expectations channel of the transmission mechanism is generally recognized as crucial for the implementation of modern monetary policy. This paper briefly reviews the practices commonly employed for measuring inflation expectations in South Africa, and offers an additional method, which is market-based. The methodologies of Nelson and Siegel and Svensson are applied to determine implied nominal and real forward interest rates. The difference between the nominal and real forward rates (called inflation compensation) on a particular day is then used as a proxy for the market's inflation expectations. This measure should not be viewed as a substitute for other measures of inflation expectations, but should rather supplement these in order to offer an additional insight. Bibliogr., notes, ref., sum. [Journal abstract] |