Introduction This review of monetary policy is presented against a backdrop of financial turmoil in global markets, which has increased the degree of uncertainty regarding the world economic outlook considerably. Although South African markets have been fairly resilient to the current crisis, the heightened levels of uncertainty about the global economy are contributing to a challenging monetary policy-making environment. At the same time, policy has to deal with the continuing pass-through of inflation pressures from a succession of international food and energy price shocks; developments in domestic electricity prices; and, more recently, from the foreign-exchange rate of the rand. An important development for the inflation-targeting framework was the announcement by the Minister of Finance on 21 October 2008 that the targeted inflation measure would be changed from 25 February 2009. The year-on-year increase in the consumer price index excluding mortgage interest cost for metropolitan and other urban areas (CPIX) would be replaced as the targeted measure with the headline consumer price index (CPI for all urban areas). More information regarding this change is provided in the boxes that are included in this document. In this Monetary Policy Review the latest developments in inflation and the factors that impact on inflation are analysed. Recent monetary policy developments are then reviewed, and the outlook for inflation and the inflation forecast are presented. In addition, three issues are examined in boxes. The first box discusses the changes to the inflation target measure, while the second reviews the international treatment of owner-occupied housing in measures of consumer prices and places the changes in the South African consumer price index (CPI) in context. The final box provides an analysis of the changes in the weights of various expenditure groups for the new headline CPI.