The Reserve Bank must protect the value of the currency, that is, must work against inflation. In terms of the Reserve Bank Act, the Bank is accountable to Parliament and must, from time to time, report to Parliament on progress made with the achievement of its mandate, namely to protect the value of the currency. The Bank on its own cannot prevent the development of all inflationary pressures in the economy, but must at all times use the powers at its disposal to prevent such forces from eroding the value of the currency. The Reserve Bank's powers are, however, restricted to the area of money creation and financial activities related to this very important function conferred upon central banks in all market economies. The Reserve Bank therefore operates mainly in the financial system in pursuing its objective of protecting the value of the currency.
Money plays a vital role in the market economy.
As a means of payment, it facilitates the exchange of goods and services which would, without money, only be tradeable in complex barter deals. As a store of value, it enables purchasing power to be accumulated and to be held for future use. Money indeed enables the market economy to work. The task of the central bank to protect the value of money is therefore indeed an assignment to protect the market economy. The ability of banks to create money is, in turn, dependent on the amount of primary money that the Reserve Bank will at any time be prepared to make available to them.