all the time, there will be a constant need for sizeable repo rate adjustments, with the attendant marked fluctuations in market interest rates, output and employment. if temporary deviations from the central bank ’ s target are tolerated, on the other hand, monetary policy can be implemented more smoothly. a gradual adjustment of output and employment ultimately brings inflation back into line with the target. both these routes have their drawbacks. negative effects on employment and output from major changes in the repo rate are liable to erode public confidence in the central bank and the monetary policy regime. at the same time, undue acceptance of large deviations from the inflation target may weaken the target ’ s credibility and lead both to rising inflation expectations and to high costs for ultimately bringing inflation back on target. as a result, central banks tend to prefer a monetary policy strategy that lies somewhere between these two extremes, avoiding excessively large interest rate adjustments but not hesitating to adjust when this is called for. the riksbank normally formulates monetary policy with a view to inflation one to two years ahead. this unfortunately means that the repo rate has to be set with the aid of forecasts and forecasts can err. moreover, there is always the possibility of price shocks that are a - cyclical but still affect the rate of inflation. a forward - looking policy has the advantage, however, of permitting an implementation that is smoother yet firm. the riksbank reacts to the inflation forecasts in a determined manner but as the forecasts include an assessment of the extent to which inflationary impulses are transient, over - reactions are avoided. the supply shocks i referred to earlier as having occurred during the past year are examples of price fluctuations that, with the monetary policy strategy the riksbank has chosen, can occasion deviations from the inflation target. this is not the first time inflation has been affected by occasional factors. in the late 1990s, for example, successive deregulations of electricity and telecom markets resulted in deviations from the target, the difference being that at that time the gap was on the downside. what has happened now is the opposite. with our monetary policy strategy, this is a natural case of striking a reasonable balance between maintaining the fixed value of money and avoiding excessively large fluctuations in economic activity. it cannot be stressed too strongly that although the riksbank ’ s sights are consistently on the target, inflation will always tend to hover around the bull ’ s

michael gondwe : 50 years of central banking in zambia – repositioning for the future speech by dr michael gondwe, governor of the bank of zambia, at the official launch of the 50th anniversary celebrations of the bank of zambia, lusaka, 10 may 2014. * * * • deputy governor – administration • senior directors and directors • representatives from commercial banks • members of staff and former members of staff present • members of the press • ladies and gentlemen i would like to extend a warm welcome to you all on behalf of the bank of zambia and indeed on my own behalf, to the official launch of the bank of zambia ’ s 50th anniversary celebrations, since its establishment on 7th august 1964. the theme for the bank of zambia ’ s jubilee celebrations is “ 50 years of central banking : repositioning for the future ”. this is indeed a momentous year for our country, as it will also mark the commemoration of zambia ’ s golden jubilee. distinguished colleagues, the bank of zambia has during the last 50 years gone through different phases of transformation and development. i am proud to say that the bank has, from the time of establishment in august 1964, matured into an institution whose roles have changed to respond to the growing and changing demands of an emerging economy and deal with complexities of globalisation. the staff, past and present should be proud of the useful contribution, you have made towards the steady progress the bank has made in its quest to attain its mission of “ achieving and maintaining price and financial system stability for balanced macroeconomic development ”. ladies and gentlemen, this progress, has however, not been with any challenges. among the challenges was, the global economic and financial crisis during 2008 / 2009, which adversely affected most economies. it is, therefore, of utmost importance that we reposition ourselves to mitigate these types of challenges should they threaten to recur in the future. colleagues, this 50th anniversary celebration therefore presents us with an opportunity to reflect on the achievements and challenges of the bank since its inception. you will recall from my “ town hall speech ” to members of staff in january 2014 that going forward we need to work harder and build on the successes we have scored in the past, by focusing on enhancing productivity and accountability under what i termed “ the new bank we need ”. in repositioning ourselves, i would like to remind you of some of the tenets we need as the new bank which include the following : 1. productivity and accountability ; 2