gill marcus : fourteen years of inflation targeting in south africa and the challenge of a changing mandate opening address by ms gill marcus, governor of the south african reserve bank, at the biennial conference of the bank “ fourteen years of inflation targeting in south africa and the challenge of a changing mandate ”, pretoria, 30 october 2014. * * * it gives me great pleasure to welcome you all to the biennial conference of the south african reserve bank. the theme this year is “ fourteen years of inflation targeting in south africa and the challenge of a changing mandate ”. lessons from history tell us that nothing is static, that societies and economies evolve, as do policies and policy frameworks. when things appear to be going well, it is often difficult to imagine that this will not continue or that the status quo will change, or how indeed it will or can change. during the so - called “ great moderation ” of the mid - 2000s, when global inflation was low, the battle against business cycles was seemingly won, and inflation targeting, or some variant thereof had gained widespread acceptability, it was hard to envisage what would come next, and what would cause us to reconsider the adequacy of the framework. little did we know that very soon, in the wake of the global financial crisis, we would be asking the question whether inflation targeting was enough, and if not, how should the framework be modified or augmented, and should central bank mandates be expanded? the global financial crisis was a salutary reminder that nothing is static, that central banks largely deal with the unknown future, and that we have to adapt to changing and unexpected circumstances. however, there is still an intense debate about whether monetary policy should change, and how it should change. the aim of this conference is to provide a platform to debate these issues rigorously, and we are indeed privileged to have a high - level line - up of recognised authorities in the field, both international and local, to stimulate these discussions. although the focus of the conference is more about the future, the topic does imply some assessment of the framework, and i will attempt to provide brief reflections of the past 14 years of inflation targeting in south africa. i will also reflect on global developments in monetary policy and in particular in respect of the expanding mandates of central banks and how these developments relate to our domestic circumstances. has inflation targeting been a success in south africa? it is hard to say in the absence of the counterfactual,

merely raise inflation expectations, and actual inflation would then likely increase. the end result would be higher nominal interest rates, and because of possible higher inflation variability and other risk premia, we could end up with higher real interest rates as well. in conclusion, inflation targeting is not as straight - forward as its name suggests. there are many contentious issues, and the challenges facing emerging market economies are different to those of the advanced economies. we are extremely fortunate to have a strong line - up of international and local experts on this topic to provide us with their thinking on this important policy question and to stimulate discussion. there is also keen interest and participation in the conference, with a wide range of delegates, and i am sure you will all be active participants in the discussions. i am particularly grateful to our international visitors who have undertaken the long journey to be with us, and we hope that you will enjoy your stay with us and will have time to gain an appreciation of our country beyond the confines of the central bank and monetary policy. thank you. bis central bankers ’ speeches