monetary authorities to keep the pace of demand in line with the supply capacity of the economy. to try to maintain that balance, between demand and supply in the economy, is essentially the task of monetary policy and the aim the central bank is pursuing when it sets interest rates. if it succeeds, inflation will be kept low and the economy can continue to grow at a steady and sustainable rate on a continuing and lasting basis. there is an important corollary of this process. this is that there is not, in any meaningful sense, a trade - off between growth and low inflation. it is not in practice feasible to contemplate living with a somewhat higher rate of inflation, even for a period, in the hope that this would bring higher growth. the reason is that low inflation is not an alternative to growth, but a necessary and essential pre - condition. without a commitment - made and delivered - to keeping inflation low, we will not achieve on a sustainable basis the growth of which the economy is capable. with low inflation, demand, and hence output, in the economy can continue to grow on a steady and sustainable basis. in pursuing low inflation, therefore, the central bank is aiming for exactly the same goals that we all desire - continuing sustainable growth in output and employment and living standards across the economy as a whole. the inflation - targeting framework in south africa has a critical role to play in maintaining low inflation. its strength lies in the fact that its structure contains what i believe to be the four key elements for an effective monetary framework. let me say a word briefly about each. first, the framework provides for an explicit target to be set for inflation. this is currently that inflation, as measured by the cpix, should be brought back down to, and held within, a range of 3 - 6 %. the value of setting an explicit target in this form is that it helps to anchor inflation expectations to a low level. business and industry, and individuals, in making their own financial plans, will hopefully do so on the basis that inflation will be kept in that range over time ; and on the basis that, if, as at present, inflation moves outside that range, the policy stance will be adjusted promptly to bring it back within range - as indeed was done last year. anchoring expectations in this way helps in turn to build low inflation into the fabric of the economy as a whole. the target also, importantly, provides a means, quite properly, of holding the central bank

t t mboweni : the global economy and central banking in africa address by mr t t mboweni, governor of the south african reserve bank, at the national bank of belgium, brussels, 9 november 2004. * 1. * * introduction the global economy changed considerably in recent years with important consequences for central banking. during the last half of the previous century the world economy was characterised by a process of liberalisation, deregulation and eventually globalisation, i. e. a process through which an increasingly free flow of ideas, people, goods, services and capital leads to the integration of economies and societies. globalisation brought increasing prosperity to the countries that became involved in it. the free flow of goods, capital and people boosted incomes and raised living standards in many parts of the world. in addition, new technological advances reduced transportation, telecommunication and computation costs. these developments did not only lead to greater operational effectiveness, but also increased the ease with which national markets could be integrated globally. the more integrated world economy did not benefit all economies and all the inhabitants of the globe. mr horst kohler, the past managing director of the international monetary fund recently stated that : “ nearly 1, 2 billion people - one fifth of humankind - continue to live in absolute poverty, with incomes less than $ 1 a day. in many countries, durable economic and social progress remains elusive. in most of these countries, trade has decreased in the last 20 years and on average, economic growth has not kept pace with population growth. the situation in africa is particularly dramatic because it is aggravated by the aids pandemic. i believe that the fight against global poverty is the greatest challenge for stability and peace in the 21st century. ” it is true that disease, unemployment and poverty reduction remain the major challenges confronting policymakers in africa. for this reason it is encouraging that african leaders have embraced the new partnership for africa ’ s development ( nepad ) to confront the challenges facing the continent. nepad is a strategic development plan that addresses the economic, social and political dimensions of africa ’ s future development. it is a clear demonstration of the willingness of the leaders in africa to take responsibility for actions needed to advance development. the vision and way forward basically consist of creating the policy environment and institutions that are necessary to translate the political commitment into economic benefits. it is further encouraging that there has been some improvement in africa ’ s growth performance since the mid - 1990s, albeit from a low level. the average growth rate