Introduction During the past six months the inflation outlook has improved significantly. The rate of inflation has declined to a level within the upper limit of the 3-6 per cent inflation target range, and it is anticipated that it will remain comfortably within the target range for the foreseeable future. The decline in inflation in 2003 has been a consequence of the monetary policy stance adopted in 2002, combined with the recovery in the exchange rate of the rand, and a favourable international inflation environment. A technical revision also resulted in Statistics South Africa (Stats SA) adjusting the inflation data downward in May. As the inflation outlook improved, the monetary policy stance has been adjusted on four occasions in 2003. After keeping the stance unchanged at the March meeting, the repo rate was then cut by 150 basis points in June, by 100 basis points in August and September, and again by 150 basis points in October. On each occasion the Bank’s forecast and other indicators suggested that the CPIX inflation rate would remain within the target range over the forecast period. As usual, the Monetary Policy Review analyses developments in inflation and the factors that impact on inflation. Recent monetary policy developments are then reviewed, and the outlook for inflation as well as the inflation forecast are presented. In addition four issues are examined in boxes. The first box discusses the revision of the inflation data by Stats SA in May 2003, while the second provides an analysis of the housing component of the consumer price indices. The third box discusses the global disinflation experienced in the past two decades, and the factors that have contributed to it. The final box addresses the question of whether low inflation is sustainable in South Africa.