to household consumption expenditure. since that meeting, there have been a number of data releases that have heightened speculation about further reductions in the repo rate. in particular, the february retail sales came in well below consensus, and some of the manufacturing sector releases also disappointed. i should, however, warn against jumping to conclusions, particularly on the basis of one month ’ s data that is open to various interpretations. it is important to look at the reasons for the latest repurchase rate reduction. our statement emphasised that despite clear signs that the economy had emerged from the recession, the pace of recovery was still below potential. we saw the improvement in consumption expenditure in particular as being tenuous. it does not however follow that one bad retail sales number automatically leads to a need for further easing. the latest data were a confirmation of the fragile nature of consumption expenditure growth, rather than necessarily being a downside surprise requiring further stimulus. i am sure that the general view of the mpc which prevailed at the time would therefore be unchanged in the light of recent data : that is, that the relatively low growth in consumption expenditure, together with other factors, provided a window of opportunity to reduce rates without jeopardising the inflation target. however, the scope for further easing is limited, and the repurchase rate is likely to remain stable for some time. i must emphasise that this is not an unconditional commitment. it is dependent on there being no major developments that change the inflation outlook, or significant changes in the risks to the outlook. such occurrences would include markedly lower than expected output or expenditure trends, or a sustained further appreciation of the rand exchange rate, which overall would lead to a significant decline in the long term inflation forecast. conclusion monetary policy always has to be implemented in a forward - looking manner, given the lags between a policy change and its full impact on the economy. we will continue to examine the data in a forward - looking manner and, taking all factors into account, will decide accordingly. at this stage inflation appears to be consistently within the inflation target range and the domestic economy appears to be on a recovery path. however, significant risks to the domestic and global outlook remain and we will maintain our vigilance. we will continue to try to contribute to long - term economic growth through our endeavours to achieve our mandate and through our commitment to price stability. thank you.

, bedding down the appropriate legal framework, accounting and auditing standards as well as a reliable system of credit information on individual borrowers. turning to inflation prospects, there had been no indication during the first half of last year of any impending upward movement in inflation. south africa, in line with most of its trading partners, had experienced a slowdown in economic growth during the first half of 2001, but both fiscal and current account performance was strong and inflation was falling. there had been sustained fiscal rectitude and very strong revenue growth with the resultant favourable budget deficit to gdp outcome for fiscal 2001 / 02. as a result of improved macroeconomic performance and prospects in general, south africa earned investment grade status on its external sovereign debt from moody's in november 2001 while default risk spreads on south africa's external sovereign debt narrowed by some 130 basis points during the course of the year. given the fact that we are in an inflation - targeting framework, the reserve bank therefore does not have any intermediate targets or guidelines as was the case before the year 2000. the four measured and timely increases in short - term interest rates so far this year to counter the inflation spiral were entirely appropriate but inflation expectations have nevertheless continued to harden somewhat. the presence of some excess capacity in the economy should however help limit price pressures, but much also depends on movements in unit labour costs. it is still too early to assess the eventual second round inflation outcomes of recent unit labour cost developments in south africa although it is apparent that the 2002 inflation target might not be attained. the findings of the most recent survey of inflationary expectations reflect the changed expectations of respondents. the indexation of wages in a number of important pay settlements also raises concerns about the eventual second - round effects of recent large price increases and the bank will, as always, vigilantly monitor the situation in the months ahead. i emphasised in a recent speech that interest rate decisions by the mpc are conditioned by prevailing demand pressures, currency and labour cost movements and other indicators of inflationary conditions. in view of the relatively long transmission lags between interest rate changes and inflation, it is important that corrective measures are timeous and measured without seriously jeopardising the economy's growth performance. flexible inflation targeting implies that the bank should avoid severe corrective action to bring inflation in 2003 or any of the subsequent years to within the target range at significant cost to the real economy. at the same time, however, the bank must ensure that any