##ent to sudden changes in investor sentiment than they were at the time of the asian crisis in 1997 / 98. a major disappointment during 2006 was the inability of trade negotiators around the globe to conclude or, at least, continue with discussions in the doha round of the world trade organisation. there is no doubt that the major reason for the doha breakdown is to be found in disagreements over agricultural sector protection. the failure of these trade negotiations came as a major disappointment to developing countries in all regions, but the ultimate cost could be borne by both developed and developing nations. apart from the foregone opportunities for both developed and developing countries that a successful conclusion would have provided, of greater importance are the losses that all will be incurred if the world trading system is allowed to deteriorate with a reversion to protectionism. 3. domestic economic developments on the domestic front, 2006 has proved to be an eventful and challenging year, which has been influenced to a significant degree by the international developments that i have made mention to above. from a monetary policy perspective, we have continued to achieve our mandate, which is to keep cpix inflation within the target range of 3 - 6 per cent. inflation has been within this range since september 2003 which enabled us to reduce nominal interest rates by a total of 650 basis points between june 2003 and april 2005. in recent months the trend of inflation has been rising, and in october cpix inflation measured ( 5 % ) per cent compared to 3, 7 per cent in april of this year. furthermore our forecasts suggest that inflation could reach the 6 per cent level by the second quarter of next year. in response to the deteriorating inflation outlook, the monetary policy stance was adjusted in june of this year when we increased the repo rate by 50 basis points. the repo rate was increased further by 50 basis at each of the subsequent meetings in august and october. for much of the year, international oil price developments posed a major risk to inflation. the price of 95 octane petrol increased from r5, 49 per litre in january 2006 to peak at r7, 04 per litre in august. fortunately pressures on inflation from this source dissipated somewhat with the decline in the international oil prices and since august domestic petrol prices have declined by a total of r1, 07 per litre. despite this recent moderation, we still see the international oil price being vulnerable to global geo - political tensions, and therefore it continues to pose an upside risk to our inflation outlook

in context. while this decision was the first upward adjustment bis central bankers ’ speeches to short - term rates in nearly 10 years, the actual move was small – only 25 basis points – which, by itself, should have only a very mild impact on the overall trajectory of the economy. as we noted in the fomc statement and as chair yellen pointed out in her december press conference, even after this rate hike, the stance of monetary policy remains accommodative. moreover, it is important to recognize that there are also significant risks from waiting longer to lift off. upside forecast errors are also certainly possible. for example, while the pace of growth has generally been weaker than expected in recent years, the pace of labor market improvement has generally been stronger. by waiting, we would increase the risk that we would need to raise rates more aggressively in the future. this could unduly threaten the economic expansion. in balancing these risks, relatively “ early and slow ” seems like a better strategy than “ late and fast ” – especially when one is uncertain both about the degree of accommodation being provided by monetary policy and the level of unemployment consistent with our price stability mandate. because monetary policy works with a lag, policy normalization needs to begin before the economy reaches its employment and inflation objectives. that is, if we are to get to a neutral monetary policy setting before inflation materially overshoots our 2 percent objective, then we need to get started. once underway, the pace of policy tightening can be calibrated to how the economy and financial market conditions are responding. a particular risk of late and fast is that the unemployment rate could significantly undershoot the level consistent with price stability. if this occurred, then inflation would likely rise above our objective. at that point, history shows it is very difficult to push the unemployment rate back up just a little bit in order to contain inflation pressures. looking at the post - war period, whenever the unemployment rate has increased by more than 0. 3 to 0. 4 percentage points, the economy has always ended up in a full - blown recession with the unemployment rate rising by at least 1. 9 percentage points. this is an outcome to avoid, especially given that in an economic downturn the last to be hired are often the first to be fired. the goal is the maximum sustainable level of employment – in other words, the most job opportunities for the most people over the long run. some of you may be wondering whether the risk