per annum ( since the mid - 1990s ), in practice the bank adopted a relatively flexible approach where these guidelines were indeed treated as guidelines only. a further guideline for growth in total bank credit extension of around 10 percent was also adopted. but when these guidelines were exceeded by considerable margins, this was on occasion tolerated without strong policy adjustments, on the basis of developments in other variables. in practice it was quite apparent that growth in the money supply could sometimes be a misleading indicator of current and future inflation. accordingly, a number of other variables were also analysed in deciding upon the appropriate monetary policy stance. these included the pace of growth in the banking sector ’ s credit extension, movements in consumer price and production price inflation, domestic production and expenditure, the balance of payments and exchange rate situation, and the fiscal policy stance. the inflationary potential of developments in all these and many other variables was assessed on an ongoing basis. accordingly, growth in money supply was not really the pivotal variable around which monetary policy revolved - although excessive growth in money supply certainly did signal the need for additional caution. however, money supply growth was deemed to be important and was formally recognised as the intermediate target variable. what has since changed? instead of targeting guidelines for intermediate objectives, the reserve bank now directly targets inflation. it monitors and analyses a whole range of factors that can affect the rate of inflation. the inflation rate, or more specifically cpix, which is the headline consumer price index excluding mortgage costs, has to fall between 6 and 3 percent by the end of the calendar year 2002. it is within this target and this monetary policy framework that the south african reserve bank will strive to achieve in the short term what we are mandated to do : that is to achieve price stability. such a framework for monetary policy ensures that monetary policy is transparent, in that the authorities have a definite and measurable aim in their conduct of monetary policy. and at the same time, it should give the citizens of this country an aspect of clarity about the future as it makes clear the bank ’ s intentions. in so doing, inflation targeting should also ease the burden and take the " guesswork " out of many of the decisions that businesses have to make when planning for future expansion and investment. it should also provide an anchor for inflation expectations and guide both employers and employees when undertaking forward - looking negotiations. however, it must be emphasised that at least some of the success of the inflation targeting framework rests on whether it is fully

strike a balance. full disclosure is neither possible nor desirable. sensitive information must remain confidential, as it could endanger financial stability if revealed. the third pillar is to ensure the legality of supervisory action. there are two elements to this. the first is that there are concerns that tensions could arise from having monetary policy and supervision under one roof. in my view, the clear delineation of mandates in the legal framework and the functional separation of the policy areas mitigate such risks, and i pledge to ensure that the separation principle is fully respected. it ’ s worth 1 / 2 bis central bankers'speeches remembering that a system - wide perspective is the key advantage of european banking supervision, as it allows us to identify and react to euro area - wide linkages and spillovers. applying national laws, on the other hand, can lead to a fragmented implementation of supervisory rules. the second element is that we have to act within the boundaries of our mandate and respect the law at all times. any supervisory action must remain bank - specific and be taken within the limits of relevant european legislation, which is defined by the co - legislators, i. e. the european parliament and the council, with further specifications from the european banking authority. i look forward to answering your questions. 2 / 2 bis central bankers'speeches