Governor’s forewordIt gives me great pleasure to present the Annual Report of the South African Reserve Bank (the Bank) for the financial year ended 31 March 2009 to the shareholders and other stakeholders of the Bank. This Annual Report provides an overview of the main operational activities of the Bank, including an analysis of monetary policy. The report also includes a comprehensive review of  international and domestic economic developments in the past year.The Bank has diverse responsibilities and roles in both the domestic and international arenas. These activities are highlighted in this report. The overriding objective of theBank remains the achievement and maintenance of price stability, which it implements within an inflation-targeting framework. Apart from monetary policy, the Bank is alsoresponsible for the production of notes and coin;  oversight of the national payment system; bank supervision; management of gold and foreign-exchange reserves; and administration of exchange control measures.During the past year, the global financial crisis meant that the Bank became more closely involved in international forums, particularly the Group of Twenty (G-20), as part of a co-ordinated global policy response to the crisis. The Bank has also maintained a greater focus on financial stability in general. Fortunately, the domestic financial sector has been relatively insulated from the direct impacts of the global financial-sector crisis through appropriate monitoring and supervision of the domestic banking sector.The heightened uncertainty in international financial markets also resulted in a highly synchronised global economic downturn in the final quarter of 2008. South Africa was not immune to these developments, and negative growth was experienced in the fourth quarter of 2008 and the first two quarters of 2009. International commodity prices, particularly oil prices, declined  substantially and, along with weak household consumption expenditure and moderating growth in credit extension, this meant that some of the main pressures on inflation had dissipated somewhat. Nevertheless,consumer price index (CPI) inflation remained subject to a degree of stickiness as a result of stubbornly high food prices and significant increases in some administered prices. Targeted inflation has, therefore, remained outside the target range for the whole of the review period.Despite the disappointing inflation outcomes, a more accommodative monetary policy was adopted by the Monetary Policy Committee (MPC). As a result, between December 2008 and August 2009 the repurchase rate was reduced by a cumulative 500 basis points. The MPC was of the view that, despite some inflation inertia, targeted inflation was expected to moderate to within the target range by the second quarter of 2010. Byadopting a forward-looking flexible approach, the MPC was able to provide some stimulus to the slowing economy, while maintaining the focus on its primary objective of price stability.The primary objective of the Bank remains the achievement and maintenance of price stability in the interest of sustainable economic growth in South Africa. The Bank will continue to pursue this objective within a flexible inflation-targeting framework. Recent global developments have also underlined the need for the Bank to maintain its focus on the financial sector and to contribute, where possible, to overall financial stability.T T Mboweni September 2009​