At the beginning of my second term as Governor of the South African Reserve Bank (the Bank) I am pleased and grateful to report that most of the objectives set out in my first Governor’s Address on 24 August 1999 have been achieved over the past five years. With the exception of a short period during 2002 and 2003 when exogenous factors led to an acceleration in price increases, inflation has been restricted to generally acceptable levels and inflation expectations have tended downwards. An inflation-targeting monetary policy framework with a well-organised decision-making process has been implemented. The transparency of monetary policy formulation has been improved considerably. Sound banking supervision in accordance with international best practice has been applied. On top of this, the internal administration of the Bank has been streamlined.The Bank was again successful on many fronts during the past year. By far the most significant accomplishment was the decline in the rate of inflation to within the target range of 3 to 6 per cent as specified by government.