daniel mminele : inflation targeting in the wake of the crisis and the south african experience address by mr daniel mminele, deputy governor of the south african reserve bank, at the luncheon of the southern african - german chamber of commerce and industry, johannesburg, 25 july 2012. * 1. * * introduction good afternoon and thank you to the southern african – german chamber of commerce and industry for the invitation. i thought it may be an appropriate time to take stock of monetary policy in general and more specifically in south africa since the sub - prime crisis. the years between the mid - 1980s until the outbreak of the sub - prime crisis are often referred to as the “ great moderation ”. 1 this period of reduced macroeconomic volatility came to an abrupt end in 2007, following which uncertainty, instability, extraordinary volatility and strain in financial markets became the norm. increasing trade and financial inter - linkages with the global environment meant transference of this volatility and uncertainty to the south african economy, with consequences for monetary policy. south africa ’ s monetary policy has been influenced by developments in the us and europe, however, it is also true that our experience has been vastly different to that of central banks abroad. i say this because at no time did we employ unconventional monetary policies, nor did we implement capital controls or intervene in the foreign exchange market. we were one of the few emerging market central banks not to have tightened monetary policy during this period. the crisis in europe shows no signs of abating and the threat of the us fiscal cliff looms large. judging by the most recent developments, things seem to be getting worse. speculation about the likelihood of a third round of quantitative easing by the us federal reserve and a third long - term refinancing operation by the european central bank, is gaining impetus. globally, the stance of m onetary policy is accommodative and one would be hard pressed to find anyone betting on a change in the state of affairs anytime soon. i will discuss how inflation targeting has fared through the crisis and then share some thoughts with you on south africa ’ s experience and recent developments on the monetary policy front. 2. the appropriateness of inflation targeting? new zealand was the pioneer of inflation targeting 2 and adopted the framework just over two decades ago. the idea of explicitly targeting inflation proved to be an attractive proposition for central banks and thus became much more widely embraced, with approximately 39 central banks 3 said to have inflation

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