macroeconomic policies, sound financial systems, and enhanced disclosure so that market discipline can work constructively. to this end, the reserve bank participates in the work of the bank for international settlements, where central bankers from around the world collaborate in research, and in developing international codes and best practices. the bank also participates in the financial stability forum, an international body that brings together central bankers, regulators, and government officials to address financial stability concerns. it is another example of the bank's forward - looking efforts to ensure that we are sufficiently prepared to withstand financial shocks should they occur. the bank also makes available senior personnel for international monetary fund missions to work in other countries. although the functions of the bank have changed and expanded over time, the formulation and implementation of domestic monetary policy remains one of the cornerstones of its activities. over the years the bank has applied various monetary policy frameworks. from february 2000 an inflation targeting framework was adopted. the adoption of this target formally entrusted a single monetary policy objective to the bank, namely, price stability. fully - fledged inflation targeting is based on important pillars that include an institutional commitment to price stability, instrument independence, an absence of other nominal anchors, policy transparency and accountability and specifies that fiscal dominance will not be applied. the success of inflation targeting depends strongly on central bank credibility that is derived from the market's belief in the reserve bank's resolve and ability to meet the inflation target. south africa adopted formal inflation targeting for three main reasons. in the first place, it was necessary to find the most credible and transparent monetary policy framework. this came after a period when money aggregate targets had at first proved less closely connected to the inflation rate than expected and the subsequent eclectic monetary policy framework had, among others, proved less transparent than hoped for. secondly, there was a desire to balance the bank's independence with more specific accountability. and thirdly, there was a desire to reduce the social and economic costs of high inflation by reducing the inflation expectations of both financial markets and agents in the real economy. in february 2000 it was announced that the reserve bank had to achieve an average rate of increase in the cpix measure of inflation of between 3 and 6 per cent for the year 2002. the cpix measure was chosen to ensure a wide coverage of consumer items, but without the mortgage interest component that would perversely fall as the reserve bank relaxed monetary policy, and vice versa. this inflation target measure was chosen because of the fact that it is the

) countries about the support those countries will make available to help stabilize the markets in europe – was unimaginable a mere 15 years ago. the global slowdown has implications for israel ’ s economy. interest rates in the major economies are expected to remain low for several years, and this will affect israel ’ s monetary policy. the slowdown has a direct impact on the demand for israel ’ s exports. the situation in europe is likely to have a negative effect on financial stability there, and hence on global financial stability too. this concern has already been reflected in the price of bank shares in israel. nevertheless, israel ’ s economy has reached this situation in a good condition : gdp has grown at good rates in the last several quarters, and unemployment is at its lowest level in about 30 years. the exchange rate of the shekel against the dollar has weakened in the last few months, and is expected to help exports. the trends in the current account are changing : after growing accustomed to a surplus in the last few years, we now expect the current account to be more or less balanced next year. israel ’ s economy can certainly exist in the environment of a balanced current account, but it is a new situation with which we must familiarize ourselves. the interest rate in israel is higher than those in the large advanced economies, and there is space for an interest rate cut should the need arise. bis central bankers ’ speeches israel ’ s economy received a well deserved recognition for its successful achievements in the last eight years, expressed by the recent improved credit rating. in the statement accompanying the revised rating, the rating agency stressed israel ’ s robust budget policy and wise monetary policy, as well as the determined supervision of the banking system. nonetheless, the statement also emphasized the threats on the horizon, and we must continue to adhere to the correct policies that will justify the higher rating we have been afforded, and persist in supporting the economy ’ s strength in the future. the issues that led to the outbreak of the recent demonstrations and to the formation of the trajtenberg committee are serious ones, and reflect serious problems in israel ’ s economy. many of the issues relate to the high cost of living. professor manuel trajtenberg is an excellent economist, and he is experienced in formulating policy recommendations. his appointment as head of the committee was an excellent decision, as was his choice of the other members of the committee to work with him, including, of course, the deputy governor of the bank of israel