the longer - term projection. the latest data point is in fact history. we can compare this to driving a car. we do not drive a car by focusing only on the rear - view mirror. that is a sure recipe for disaster. true, we have to look in the rear - view mirror every now and again in case there is a bad driver bearing down on us, but we should be generally looking ahead. unfortunately, as with policy - making, the road ahead is not always clear. for these reasons, it is not possible to use the forecast in a mechanical way. although in theory models should incorporate all available information at any given point in time, there is still a certain amount of judgement that must be used. so as policy - makers, we cannot devolve our responsibilities to the outcomes of the model. much consideration has to be given to a thorough analysis of the risks to the outlook. even the most sophisticated models need to be supplanted by anecdotal and other off - model information. as federal reserve chairman ben bernanke recently remarked, “ for all the advances that have been made in modeling and statistical analysis, practical forecasting continues to involve art as well as science. ” our most recent forecast that we reported on in the august mpc statement suggests that we will be outside the target range until the second quarter of next year, and then inflation will gradually decline. however this forecast is only as good as the assumptions we have put in to the model. the sensitivity of the forecast to oil price and exchange rate changes are well known, and any unexpected changes in these or other variables will cause the forecast to change. so there can be no guarantee that the forecast will be the same next time. forecasts cannot be followed in a mechanical fashion since relevant off - model information has to be accounted for and the risks to the forecasts assessed. 5. forecasting and transparency the global trend in recent years is towards increased transparency in monetary policy formulation. this helps to make monetary policy more predictable which, in turn, helps reduce volatility in markets and make forward planning easier. we can debate about where to draw the line as to the limits of transparency, but one of the new trends has been for central banks to publish their forecasts as well as their forecasting models. for some time we have been showing our central forecast and the associated fan chart in the monetary policy review ( mpr ) which we publish twice a year. this is the

demonstrated a lack of concern for growth and employment in south africa. nothing can be further from the truth. 2. the inflation targeting framework at this point it may be useful to make a few comments about inflation targeting in general. some recent statements from many commentators about the appropriateness of inflation targeting often seem to misunderstand what the framework is about. here we wish to emphasise the word framework, because that is what it is. it is not a policy, and it is not an instrument. it is not a dogma. take away inflation targeting, and we will still have monetary policy, we will still have the same instruments of monetary policy, and the bank will still have a constitutional mandate to maintain low inflation. furthermore, any central bank worth its salt would want in any case to achieve and maintain price stability, meaning low and stable sustainable inflation levels. so even if we did not have an explicit inflation target as set out in the inflation targeting framework, we would still want to pursue price stability. central banks are in the business of price stability. our monetary policy objectives would therefore remain the same, and we would face the same challenges as we confront today on how to respond to exogenous shocks and second round effects. it should be noted that it is not only formal inflation targeting central banks that successfully pursue a low inflation objective. the us fed and the european central bank are cases in point. the advantage of an inflation targeting framework is that it provides an anchor for inflation expectations, as it makes explicit the goal of monetary policy. that publicly stated goal is very, very significant in that it also binds politicians to abide by it. this is in our case ex - ante coordination of policy. the more anchored expectations are the more flexibility monetary policy has in responding to exogenous shocks. but announcing a target on its own does not guarantee success. it is not a magic wand. it has to be backed up by appropriate actions to build monetary policy credibility in the eyes of the public. credibility has to be earned, it is not ordained. those who criticise inflation targeting often argue that the framework is a straight - jacket which induces procyclical monetary policy particularly in the presence of supply - side shocks. whether or not this is the case is an empirical question for debate, and is determined in part by the flexibility with which monetary policy is implemented. there is in our view, a distinction between what is referred to as strict and flexible inflation targeting. strict inflation targeting