month. the consolidated deposit liabilities of the banks, along with the value of notes and coin in circulation, are summarised in the monetary aggregates labelled m1a, m1, m2 and m3. in the past, the change in the broad monetary aggregate m3, relative to a pre - announced desired or guideline rate of change, was used for policy making. this approach to monetary policy making was based on the assumption that there was a fairly stable short - run relationship between changes in m3 and changes in nominal aggregate spending. unfortunately this relationship became less reliable over time. as a result the reserve bank started to monitor a wider variety of economic indicators and, from the beginning of this year, shifted to formal inflation targeting. at present, monetary policy decisions are anchored directly to the achievement of a specified average inflation rate of between 3 and 6 % in 2002. it is important to note that monetary policy decision making is not an exact science, and possibly never will be, even with the most accurate macroeconomic measurements imaginable. this is why the bank cannot base a policy decision on the deviation of a rather uncertain inflation forecast from a targeted future rate. but neither can policy decisions be a matter of sweeping, broad impressions based upon anecdotal evidence and partial information. what the members of the monetary policy committee of the bank do is to make the best professionally informed analysis they can of all the sources of information at their disposal, relating to every important market in the economy. then they constantly review and modify their judgements, in the light of new information as it becomes available. policy decisions are highly complex and the monetary policy committee does not take them lightly. decisions are definitely not two - dimensional and take far more factors into consideration than an inflation and growth perspective. the committee uses a vast array of official economic statistics and financial market data, and all the publicly available and some private surveys and commentaries, to make a decision about the monetary policy stance. what is more, the bank openly releases the facts as they are available to us, as well as the analyses made by the monetary policy committee and by the research staff, regularly through the statements of the committee and in the publication of the quarterly bulletin and the annual economic report. all policy decisions are nevertheless always taken with a view to achieving and maintaining financial stability. 6. concluding remarks some commentators have rather dated views that monetary policy decisions should be aimed at maximising economic growth in the short run. i believe that the primary role of monetary policy is

especially for the third of international monetary fund ( 2018 ), ‘ annex viii. the distributional impact of inflation ’, south africa 2018 article iv consultation, available at https : / / www. imf. org / ~ / media / files / publications / cr / 2018 / cr18246. ashx. page 14 of 15 households which are not closely connected to labour markets or which are disadvantaged by having less education. where monetary policy tolerates higher inflation, this tends to reduce spending power, especially for the poor. put together, all this suggests that a more inflationary monetary policy is likely to make inequality worse. as the guardians of the value of the currency in south africa, it is important that we at the south african reserve bank bear all this in mind when we make monetary policy decisions. the richest 20 % of south africans can make themselves heard quite easily. they let us know when our raising of rates pushes up their bond repayments. they do a good job of getting a cost - of - living adjustment every year. they often don ’ t realise how many poorer people there are out there, because they assume they are roughly in the middle of the income distribution, not close to the top. but we as the central bank have to think about everyone in south africa, including the other 80 % of households. i hope that today i have left you with a clearer sense of what monetary policy does, and what it cannot do. at the simplest level, we know that low inflation has many benefits, so that ’ s what we aim to deliver. but there are also many other policies and agencies that affect south africa ’ s worst problems, including poverty, unemployment and inequality. our contribution as the central bank is just one part of the fight against these evils. thank you. page 15 of 15