demonstrated a lack of concern for growth and employment in south africa. nothing can be further from the truth. 2. the inflation targeting framework at this point it may be useful to make a few comments about inflation targeting in general. some recent statements from many commentators about the appropriateness of inflation targeting often seem to misunderstand what the framework is about. here we wish to emphasise the word framework, because that is what it is. it is not a policy, and it is not an instrument. it is not a dogma. take away inflation targeting, and we will still have monetary policy, we will still have the same instruments of monetary policy, and the bank will still have a constitutional mandate to maintain low inflation. furthermore, any central bank worth its salt would want in any case to achieve and maintain price stability, meaning low and stable sustainable inflation levels. so even if we did not have an explicit inflation target as set out in the inflation targeting framework, we would still want to pursue price stability. central banks are in the business of price stability. our monetary policy objectives would therefore remain the same, and we would face the same challenges as we confront today on how to respond to exogenous shocks and second round effects. it should be noted that it is not only formal inflation targeting central banks that successfully pursue a low inflation objective. the us fed and the european central bank are cases in point. the advantage of an inflation targeting framework is that it provides an anchor for inflation expectations, as it makes explicit the goal of monetary policy. that publicly stated goal is very, very significant in that it also binds politicians to abide by it. this is in our case ex - ante coordination of policy. the more anchored expectations are the more flexibility monetary policy has in responding to exogenous shocks. but announcing a target on its own does not guarantee success. it is not a magic wand. it has to be backed up by appropriate actions to build monetary policy credibility in the eyes of the public. credibility has to be earned, it is not ordained. those who criticise inflation targeting often argue that the framework is a straight - jacket which induces procyclical monetary policy particularly in the presence of supply - side shocks. whether or not this is the case is an empirical question for debate, and is determined in part by the flexibility with which monetary policy is implemented. there is in our view, a distinction between what is referred to as strict and flexible inflation targeting. strict inflation targeting

. over the past few months, gross foreign exchange reserves have increased to levels above usd35 billion, largely due to the successful international bond issue which took place in may this year. as you are aware, the national treasury placed part of the proceeds of this issue in a foreign deposit account with the sarb which, in future, will be used towards fulfilling government ’ s foreign currency commitments falling due. nonetheless, the sarb increased its open market operations during the year, using the traditional sterilisation instruments at its disposal. sarb debentures increased by r9, 6 billion to r28, 0 billion at the end of april 2009. the longer - term reverse repos were mostly unchanged around r7, 6 billion. government deposits at the sarb increased by r2, 7 billion ; much of this is related to accrued interest. liquidity was also drained via an increase in the notes and coin in circulation of r4, 3 billion and an increase in the cash reserve account balances of banks of r5, 4 billion. to square their end - of - day positions, banks predominantly utilised the cash reserve accounts and only on a few occasions did the sarb have to conduct standing facility operations. these standing facility operations, it must be emphasized, were not in any way linked to stresses in the financial system ; rather, they arose due to unexpected increases or decreases in notes and coin flows or because it was the end of the cash reserve maintenance period. the sarb did not effect any changes to the refinancing procedures over the past year, but continues to engage with market participants through the money market liaison group meetings to discuss issues related to the money markets and sarb operational procedures. as indicated last year, a number of other fine - tuning operational issues, including the coordination of the maturity dates of the sarb ’ s open market operations with mpc dates, are under consideration but have not yet been finalized. one of the most challenging tasks facing us has been accurately to forecast the quantity of notes banks will need each day. in an attempt to improve the liquidity estimates provided to the market, the sarb plans to use the end - of - day notes and coin figure with a one - day lag in its liquidity calculations. this will assist the sarb in calculating much more accurate liquidity estimates and thereby also allow for the more efficient management of liquidity : there should be less cost and inconvenience to both you and the sar