Introduction Global output and trade have contracted sharply in the period since the previous Monetary Policy Review was published in November 2008. Financial markets remain under stress, despite the introduction of extensive fiscal and monetary policy measures by governments and central banks, and falling asset prices and disruptions to credit markets have impacted powerfully on consumer demand. There is growing uncertainty about the depth and duration of the economic slowdown, which is generally viewed as the most severe of the post-war period. The South African economy has not escaped the impact of these developments. Domestic production has contracted as a result of weak domestic demand and a significant decline in export demand. Real gross domestic product (GDP) contracted at an annualised rate of 1,8 per cent in the final quarter of 2008, largely as a result of a marked slowdown in the manufacturing sector, and there is a general expectation that domestic growth will remain lacklustre in 2009. Inflation is expected to continue to trend downwards, although the volatility of developments in global markets and elevated levels of uncertainty subject inflation forecasts to higher risk than usual. This Monetary Policy Review begins with an analysis of inflation developments and the factors that have impacted on inflation, followed by an assessment of recent monetary policy developments and a discussion of the outlook for inflation. Three topical issues are focused on in the boxes. The first box notes the impact on the administered prices index of the recent changes to the consumer price index (CPI) announced by Statistics South Africa (Stats SA), while the second discusses the policy measures adopted by monetary authorities in various countries in response to the global financial crisis. The third box discusses the inflation-linked bond market in South Africa with a view to facilitating the interpretation of break-even inflation rates.