put significant pressure on monetary matters for our small economy. they cause the rupee to appreciate and fuelled the rising rate of price inflation, already affected by the unprecedented spike in oil prices and the steady increase in prices of food and commodities. the bank was therefore confronted with the combined challenge of combating inflation and preserving the competitiveness of the export - oriented sectors. the monetary policy committee ( mpc ), normally set to meet on a quarterly basis, met eight times in 2008 with interim meetings having to be called to deal with rapidly - changing conditions. ( click here for further details on the work of the monetary policy committee ) with rising inflation, the bank continued with its tight monetary policy in the first quarter of 2008. unpredictable developments on the international scene in the second quarter, coupled with our own projected inflation, compelled the bank to ease its stance a little in the second quarter. an expansionary budget, handed down in june 2008, coupled with a generous wage - award for the civil service which raised the spectre of wage push inflation, further complicated the situation in the third quarter before currency volatility, stock market nervousness, financial turmoil and the global economic slowdown threw things in complete disarray in the last quarter. policy actions were coordinated with government. during 2008, the key repo rate was cut by a total of 250 basis points to stand at 6. 75 per cent at the end of the year. ( click here for evolution of the key repo rate in 2008 ) the decisions of the mpc, which are taken by simple majority, became mired in controversy. this, in turn, provided fertile ground for lobbyists and other pressure groups to seek to influence outcomes in their favour. in addition to the interest rate decisions of the mpc, the bank had recourse to other tools to respond to abnormal monetary and credit conditions. owing to structural excess liquidity in the system, the overnight rate had remained persistently outside its set limits ( the corridor ) since the framework was introduced in december 2006. the bank increased the cash reserve ratio ( crr ) from 4 per cent to 6 per cent in august. this resulted in the rate falling rapidly back within the limits of the corridor. however, in view of the rapidly - changing global environment, the bank subsequently reduced the crr first to 5 per cent and then to 4. 5 per cent in december, to ensure that the system had sufficient liquidity. another measure that i considered necessary in the circumstances

was the widening of the corridor from the symmetric band of 50 basis points to a band of 125 basis points around the key repo rate. ( click here for further details on other measures aimed at strengthening the monetary policy framework ) when we compare with many other emerging economies, which are as dependent on imports as mauritius, we have little reason to be too unhappy as we have managed to keep inflation at reasonable levels. and this year, we have the extra burden of having to counter the knock - on effects of the global economic slowdown on mauritius, especially on our exportdependent sectors such as tourism and manufacturing. to deliver on our mandate to fight inflation, the bank invested resources in capacity - building. in july 2008, the bank hosted a regional seminar on inflation targeting, modelling and forecasting, in collaboration with the centre for central banking studies of the bank of england ( ccbs ). held at the bank ’ s headquarters, and attended by central banks in the region, the seminar set a new attendance record in the entire history of the ccbs. we also published our first inflation report in november, to fall in line with a requirement of the bank of mauritius act 2004. this report retraced the historical pattern of inflation in mauritius, and offered valuable insights into the critical factors affecting fluctuations in prices, which may serve as a guide for the future. we intend to publish inflation reports twice per year. domestic debt management an important development in 2008 was the take - over of debt management functions, both domestic and external, from the debt management unit of the ministry of finance and economic empowerment. the new arrangement, which took effect from 1 july 2008, under an agreement reached by the bank with the ministry of finance and economic empowerment, also requires the bank to advise on the debt management strategy. jointly with the commonwealth secretariat, the bank organized, at the end of 2008, a two - week workshop on debt recording and management for staff members of the bank, and officers from both the ministry of finance and economic empowerment and the national audit office. domestic foreign exchange market during 2008 there were erratic movements in the foreign exchange market. this reflected rapid and substantial global fluctuations. the bank intervened regularly on the market and by the end of the year, we succeeded in significantly dampening volatility. ( click here for further details on intervention on the foreign exchange market ) there have been different views, some quite vociferous, on how “ weak ” or how “ strong ” the rupee should