was in line with international best practice at the time. following the failure of many countries to deal with stagflation problems in the 1970s, the global trend was to give central banks increased independence from political authorities in their search for price stability. but the south african context also played a key part. by the time of the 1994 democratic elections, south africa had experienced two decades of high and very volatile inflation – even as economic growth gradually came to a halt. monetary policy, in the absence of both a clear framework and a political pledge of noninterference, had struggled to contain these price gyrations. but central bank independence never meant that the sarb would have completely free reign ; neither did it mean lack of accountability. as indicated in article 224 of the constitution, which i have just quoted, there has to be ( and there is ) regular consultation between the sarb and national treasury. page 2 of 11 it is also this consultation that produced the sarb inflation targeting range – the ‘ yardstick ’ against which we would measure the achievement of price stability. the sarb has operational independence in how to best achieve its policy goals, but does not unilaterally shift these goalposts. put differently, the sarb is independent within the overall system of economic governance, but not independent of it. furthermore, accountability extends beyond consultations with national treasury. the governor and senior staff meet periodically with members of parliamentary committees, and the sarb also submits an annual report to parliament. consultations with the general public, in the form of publications as well as monetary policy forums, have also become the norm, as the sarb seeks transparency in explaining the rationale for its policy decisions. the sarb ’ s ownership structure has also raised concerns, albeit misplaced ones, about control and accountability. admittedly, the sarb is one of only a handful of central banks in the world with private shareholders. yet these shareholders do not have the power to amend the sarb act1, which can only be done by parliament. neither can they appoint the governor and deputy governors, who are responsible for monetary policy, because that is a presidential prerogative. through their representatives on the board of directors, these private shareholders merely exercise oversight over the sarb ’ s governance. there is no way in which they can interfere with monetary policy or financial stability policy decisions, prudential supervision, or the sarb ’ s other day - to - day responsibilities. the sarb

’ s performance : price and financial stability? but how well has the sarb delivered on this mandate set by the constitution? let us first recall how the technical modalities of the mandate evolved over the years. from the more eclectic approach that was in place in the 1990s, including a framework for monetary aggregates, the yardstick for the measurement of price stability moved to an inflation target in 2000. 1 sarb act 94 of 1989 page 3 of 11 south africa ’ s situation at the time, including the sensitivity of inflation to swings in energy and food prices as well as the structural changes the economy was undergoing ( such as the effects of an earlier reduction in tariffs and capital controls ), led authorities to select a 3 - 6 % inflation target range. it was always understood, however, that this target was not cast in stone and could be reviewed if justified. the 2008 - 09 global financial crisis then taught us that achieving price stability was not enough. many countries had witnessed a significant growth in financial imbalances even as inflation remained muted. these countries faced major economic adjustments as these imbalances unwound. while south africa ’ s banks and its financial system had remained sound during the crisis, and domestic financial markets had kept functioning properly, the sarb felt that it would be wise to follow international best practice and place greater emphasis on monitoring the stability of the financial system while developing tools against the potential build - up of severe imbalances. the inflation - targeting approach has yielded gradual yet significant results over the years. so far in this decade, targeted consumer price inflation has averaged 5. 2 %, down from 6. 8 % in the previous decade ( the first of the inflation - targeting regime ). inflation volatility has declined too. the standard deviation of year - on - year consumer price changes since 2010 stands at 0. 9 percentage points, compared with 2. 4 percentage points between 2000 and 2009. importantly, in the present decade, inflation has exceeded the 6 % upper end of the target range for only 26 months, compared to 70 months in the previous decade. inflation expectations, as measured by the quarterly survey of the bureau for economic research, have also become more stable over the years, and while they remained stuck at around 6 % from 2012 to 2017, they are now showing an encouraging decline towards the midpoint of the target range. meanwhile, our financial system continues to enjoy stability. south africa ’ s banks remain sound and appropriately capitalised. growth in credit