annum on a continuous basis. in carrying out our mandate, we have a direct impact on the consumer through the impact of monetary policy on inflation and interest rates. the question we are often asked is, why target inflation? low inflation is in the interest of all south africans, irrespective of whether they are consumers, business people, or retirees. inflation, which is a continuous increase in the general price level, implies a continuous decline in the value of money, which implies an erosion of the purchasing power of consumers. the bank aims to limit such a decline by achieving price stability. however, it is important to note that price stability does not imply that the prices of goods and services do not change at all. relative prices in a market economy will always change in response to changes in relative scarcities, for example after a drought, food prices are likely to increase. it is also generally the case that those consumers most vulnerable to the ravages of inflation are the poor. the wealthy members of society are in a better position to hedge against inflation for example by borrowing money to buy non - monetary assets. the wealthy often have assets that can more easily be protected against expected inflation. inflation has other adverse effects such as the distortion of the tax system, and also results in increased uncertainty which makes economic decision - making more difficult. high inflation is usually also accompanied by greater price variability. the confusing price signals make the price system less efficient, and the result is lower levels of investment and growth. we are also often asked why employment or economic growth is not the primary objective of monetary policy. as noted in the constitution, inflation is not an objective in itself, but is in the interest of sustained growth. it goes without saying that the target of monetary policy should be something that monetary policy can achieve. it is the view of the bank that although monetary policy can impact on cyclical unemployment and growth, it cannot determine long - run trend real growth. growth in the long run is determined by real variables and other supply - side factors, including government policies and the general macroeconomic environment that monetary policy contributes to. monetary policy plays an important role in shaping the macroeconomic environment in which economic agents operate. the best contribution that monetary policy can make is to provide a low and stable inflation environment that is conducive to sustainable long - term growth. the main monetary policy tool at the disposal of the bank is the interest rate. essentially the bank sets the repo rate, which is

credit act, to be implemented in the middle of this year will provide further protection to consumers. there are however always two sides to every transaction, and consumers should also act responsibly when taking on further debt. 3. accountability of the bank as noted earlier, our operational mandate is to keep cpix inflation between 3 to 6 per cent and the bank has autonomy in the conduct of monetary policy. it is well recognised that autonomy goes hand in hand with accountability. thus, one of the primary measures of accountability relates to how the bank has performed in relation to its operational mandate. monetary policy has been successful in achieving the inflation target since september 2003 when cpix moved to within the target range. this allowed for a reduction in the repo rate by 650 basis points between june 2003 and april 2005. in 2006, in response to perceived risks to the inflation outlook, the monetary policy committee increased the repo rate by 50 basis points at four consecutive meetings from june. despite this adjustment, economic growth has remained strong and we expect growth rates of around 5 per cent to be sustained. although monetary policy cannot claim all the credit, its contribution to the economy ’ s robust growth performance over the last couple of years is well recognised in many circles. our accountability extends beyond simply achieving the inflation target. since the announcement of an inflation target in south africa, any ambiguity about the ultimate goal of monetary policy has been removed. the smooth conduct of an inflation targeting framework implies a great deal of trust and confidence on the part of the public in a central bank ’ s ability and determination to achieve the target. without this credibility in the eyes of the public, a central bank ’ s policy goal is not easily achievable. since the introduction of an inflation targeting policy framework, the bank has introduced a number of initiatives to improve transparency and communication with all its stakeholders to enhance the credibility of monetary policy. in fact, communication plays an important role in fulfilling the bank ’ s obligation of accountability. for example, decisions of the monetary policy committee ( mpc ) are announced after each meeting at a televised media conference, where the motivation for the decision is explained. media representatives also have an opportunity to question the monetary policy decision and the policy stance. the publication of a bi - annual monetary policy review also broadens the understanding of the aims and conduct of monetary policy. the review analyses developments in and factors influencing inflation, assesses recent policy developments and considers the outlook for inflation. in conjunction with statements after mpc