did not see inflation coming and they did not understand it when it did. in emerging markets, we have taken some satisfaction in the verdict of many in the policy community4 that some of us did better here than the developed countries. but the big central banks are high - quality organisations and they demonstrate that quality, not by avoiding mistakes but by dealing with them and being honest about their errors. in the 1970s ‒ the last big global inflation surge ‒ central banks made many mistakes, gave many excuses and lost control of inflation. in the 2020s, i am confident we will do better, with far fewer excuses and much more success. 5 we are going to deliver on our mandates. of course, i am not a municipal manager. i doubt that my challenges, and the challenges of my profession, map directly to your challenges. that said, there is one area where our work overlaps, and that is the issue of inflation. at the sarb, our fundamental mission is to protect the buying power of the rand, and we specifically aim to protect it from increases in the cost of living, as measured by the consumer price index from stats sa. if you go to that index, you see some significant components where prices are set at the municipal level. think of water, think of rubbish collection, think of municipal rates. this discussion draws on amy edmondson. right kind of wrong : the science of failing well. 2023 an example is https : / / www. piie. com / publications / working - papers / central - banks - and - policy - communicationhow - emerging - markets - have https : / / www. federalreserve. gov / newsevents / speech / powell20220826a. htm unfortunately, these prices are often rising by more than headline inflation. in the latest inflation report from stats sa, for example, water inflation was 9. 6 %. housing assessment or municipal rates was 8. 4 %. these numbers should be much closer to the midpoint of the sarb ’ s target of 4. 5 %. high municipal inflation eats away the incomes of our people, keeps our inflation rate elevated, and makes it harder for us to lower interest rates. it ’ s ok for prices to keep up with inflation ; it ’ s not ok for some prices to always be rising by more than inflation. and we need you to take the lead to tackle this. let me conclude by summarising the main points i have made

initially had incremental downward adjustments to the near - term oil price assumption, but the longer term assumptions were relatively unchanged. by january it became clear that oil prices were likely to remain lower for longer, resulting in a more substantial downward revision over the entire forecast period. however, we did not believe that the price would remain at the levels of around us $ 45 per barrel, and we also assumed an upward trend over the forecast period. to date our assumptions have been more or less bis central bankers ’ speeches in line with actual outcomes. but changes in supply and demand conditions in international oil markets could require adjustments to these assumptions, with implications for the longer term inflation forecast. a similar situation, but in the opposite direction, faced the mpc during the 2006 - 08 period of rising oil prices. at that time the market price continually surprised on the upside, ( ultimately reaching around us $ 150 per barrel ), until the global financial crisis took the oil price on the downside of the roller coaster ride to levels of around us $ 35 per barrel. under such conditions, it is always difficult to know whether prevailing trends will persist over the forecast period, or if prices will stabilise or indeed decline. but we have to take a view, and whatever we decide could have a marked bearing on the inflation trajectory, given the 5, 7 per cent weight of petrol in the cpi basket. the other important and volatile assumption in the model is the exchange rate. again, we have to try and look through short term volatility and focus on longer term trends. in order to take account of movements between the currencies of south africa ’ s major trading partners, ( for example the recent sharp depreciation of the euro against the us dollar ), we focus on the effective or trade - weighted exchange rate. given the difficulties in forecasting the exchange rate, we make a simplifying assumption of a constant real exchange rate over the forecast period. this implies a change in the nominal effective exchange rate in line with south africa ’ s inflation differentials against its trading partners. we generally set the starting point at the prevailing index level, unless the mpc assesses this level is to be significantly out of line, in which case it may be set at a level deemed to be more appropriate. the focus of our discussions then becomes assigning the balance of risks to this forecast. we also look very carefully at different exchange rate scenarios, to get an idea of the sensitivity of the forecast