final area of responsibility : monetary policy. monetary policy monetary policy can get complicated, but the objective is straightforward : it's to foster confidence in the value of money by keeping inflation low, stable, and predictable. in an agreement with the government of canada, the bank has an inflation target of 2 per cent, which makes this objective very explicit. by its very nature, monetary policy work necessitates having a long view. the bank achieves the inflation target by raising or lowering the target for the overnight interest rate which, in turn, influences other interest rates, and, ultimately, the overall demand for goods and services. this sequence of events takes time, and monetary policy typically tries to influence inflation 6 to 8 quarters into the future. put differently, monetary policy works with a significant lag, so, when we make our interest rate decisions, we rely on various indicators of future inflation, and take a medium - term view of the economy. low, stable, and predictable inflation brings about real benefits. it allows consumers, businesses, and investors to read price signals clearly, and thus to make financial decisions with confidence. it allows businesses to make long - term investments which, in turn, contributes to sustained job creation. and, importantly, it helps to make the economy more resilient to shocks. many of you will remember the days of high and variable inflation, and can therefore appreciate the progress we've made. since 1995, total cpi inflation has averaged 2 per cent per year. that's a good record, but the bank is always looking at ways to strengthen its tools and the outcomes of monetary policy. in response to the global financial crisis and recession, the bank's monetary policy has been very aggressive, and since april of this year, the target for the overnight rate has been one quarter of one per cent – that's effectively as low as it can go. in other words, we cannot lower our policy rate any further to provide economic stimulus. recognizing the possibility that additional stimulus might be required, we researched and identified three additional monetary policy tools that we could use. the bank has not used the first two tools – quantitative and credit easing, which involve the purchase of assets – but they remain available to us. we have, however, employed the third tool identified, and that is the use of " conditional statements " about the future path of monetary policy. in our april monetary policy decision, we said that, conditional on the outlook for inflation, the

) from growth in 2024, compared to 1. 5 percentage points in 2023. page 4 of 11 as with the global trend of moderating inflation, south africa ’ s headline inflation decelerated over the past year, falling from 6. 9 % in 2022 to average 6 % in 2023. these annual averages, however, hide the ongoing volatility in the underlying components of inflation, in turn demonstrating the risks and uncertainty marking the disinflation path. since september of last year, headline inflation has been fluctuating between 5 % and 6 %, with frequent monthly setbacks coming from fuel, food and services prices. 7 in february, core inflation rose by 0. 4 percentage points to 5 %, propelled sharply higher by medical insurance inflation. encouragingly, as of june, core inflation has moved to 4. 5 %. the sarb sees core inflation averaging 4. 6 % this year, from 4. 8 % last year. inflation expectations eased in the first half of this year, but still remain well above the midpoint of the target band. while headline inflation came out between 5 % and 6 % for much of the past year, our current forecast shows it easing to 4. 9 % this year, pulled lower mainly by softening food and fuel inflation, and resting at the midpoint in 2025 and 2026. even with some quantitative and qualitative adjustments to risk perceptions over time, the monetary policy committee ( mpc ) has felt it appropriate to maintain the repurchase ( repo ) rate at 8. 25 % – a level set in may of 2023. financial stability turning to financial stability, the sarb continued to ensure that the financial system remains resilient, without any systemic threats to its functioning materialising during the 2023 / 24 financial year. this is despite the risks to the outlook that include sustained geopolitical tensions, sticky inflation and government debt levels that remain uncomfortably elevated, globally. these risks have coincided with an unprecedented number of national elections around the world, leading to some uncertainty and heightened market volatility. 7 inflation moderated to 5. 1 % in december 2023, from 5. 9 % in october, before accelerating to 5. 6 % in february 2024. headline inflation has moderated from february and remained unchanged at 5. 2 % in both april and may. page 5 of 11 south africa is still confronted with its government ’ s growing debt levels and everhigher