emerging markets in particular. domestically, between august 2007 and july 2008, food prices contributed on average 4, 1 percentage points to average cpix inflation of 9, 3 per cent. pressures from food and oil prices have also impacted on global inflation. despite a general downturn in most of the advanced economies, monetary policy in numerous countries has been tightened in recent months in response to heightened inflation pressures. since early 2008, the exchange rate has also begun to pose a threat to the inflation outlook. the exchange rate reacted to a number of developments including the widening deficit on the current account of the balance of payments, electricity supply constraints, bouts of global risk aversion and movements in the us dollar against other currencies. more recently, the rand exchange rate has appreciated somewhat from its earlier lows. the trend of wage settlements has also become an increasing risk to the inflation outlook. nominal wage settlements have been increasing over the past year, although they are still on average below the inflation rate, particularly once productivity changes are adjusted for. most other domestic determinants of inflation remained well contained and have either been neutral or helpful to inflation developments. after a long lag, household consumption expenditure showed a definite response to the tightened monetary policy stance, despite only a moderate slowdown in bank credit extension to households. demand for durable goods has been particularly responsive to higher nominal interest rates. asset price developments, in the form of lower equity prices and a subdued housing market, reduced the pressure on inflation emanating from wealth effects. output growth, which has measured around 5 per cent per annum during the past four years, showed signs of moderating and the economy appears to be growing somewhat below potential output growth. fiscal policy also remained supportive of monetary policy. in response to the impact of these developments on the inflation outlook, the monetary policy stance has been tightened progressively over the past year. the repurchase rate was increased by 50 basis points after each of four of the six mpc meetings held since the previous annual general meeting. since the tightening cycle began in june 2006, the repurchase rate has been increased by a cumulative 500 basis points. in january 2008 interest rates were kept on hold despite a mildly deteriorated inflation forecast. at that time, the risks to the outlook were more or less the same, but the mpc assessed that the extent of these risks had moderated somewhat. however, by the next meeting this assessment had changed in the light of new developments, including the risk posed to the outlook

its buildings. this project should result in a reduction in the consumption of electricity and fuel. planning is in progress for several projects at the various branches around the country to ensure the efficient distribution of currency. the design for the proposed new bloemfontein branch has commenced, and tenders are awaited for extensive additions and alterations to the east london branch. the new cafeteria at the pretoria north branch has been completed. furthermore, the cape town tower block will be upgraded and the johannesburg branch will undergo major repairs. at head office large projects aimed at enhancing the existing infrastructure have been completed. these include the replacement of carpets, modernisation of lifts and maintenance of the air - conditioning system. the upgrading of the fire protection and evacuation systems, and the project to improve accessibility for people with disabilities are under way. conclusion global and domestic developments are expected to continue to pose a challenge to monetary policy in the coming year. in the international markets heightened volatility is expected to persist and growth in industrialised countries is expected to moderate further. the outlook for commodity prices is therefore uncertain and this makes for a difficult monetary policy environment. the bank will continue to focus on bringing inflation down to within the inflation target range. the objective of the bank remains to achieve and maintain low inflation in the interest of sustainable economic growth. during times of global financial market instability it is even more important to maintain vigilance over the payment system, domestic financial markets and the banking system in particular. after the successful implementation of basel ii, the bank will continue to monitor closely the domestic banks not only with respect to the possible impact of global developments, but also to the impact of tighter credit conditions on indebted households and firms. staff development will remain one of our strategic objectives. there will be a continued focus on training and development within the context of our employment equity plan. appropriate training is a benefit not only to the individual, but more generally to the bank and the wider economy. acknowledgements i wish to thank the presidency, the government and parliament for their continued support. the bank maintained a good working relationship with the national treasury through the system of bilateral committees. furthermore, i wish to thank the minister and deputy minister of finance, and the director - general of the national treasury and his staff for their ongoing support and co - operation. sincere thanks are also due to the members of the board of the bank for their tireless efforts in ensuring appropriate corporate governance in the bank. i welcome mr elias masilela who has