Current unstable conditions in the foreign exchange, money and capital markets prescribe certain temporary changes to the monetary transmission mechanism.Effective Tuesday, the 26th May 1998, the South African Reserve Bank will replace the present system of daily tenders for repurchase transactions at a floating interest rate with seven days’ maturities with fixed rate tenders conducted daily and with one day maturities only. The Marginal Lending Facility, which was fixed at a margin of 3 per cent above the repurchase rate on a floating basis on 20 May 1998, will, until further notice, be increased to a margin of 10 per cent above the repo rate.At the next repo tender the South African Reserve Bank will provide the full market liquidity requirement for one day at a rate of 18 per cent.The Bank will not hesitate to increase short-term interest rates sharply, should speculative forces persist. Thus far the Bank has refrained from using this policy option because of the potential negative impact on bond and stock markets, and eventually the broader price of domestic credit.The Bank will, in terms of existing policy, also continue to provide liquidity to the foreign exchange market in order to smooth out undue short-term fluctuations, and avoid any crisis situation from developing in this market.