Address by Mr TT Mboweni,Governor of the South African Reserve Bank, at the Bureau for Economic Research Annual Conference  1.  INTRODUCTION There has been a widespread shift among central banks toward a more focused approach regarding inflation since the early 1990s. Countries have increasingly been granting independence to their central banks with a first policy priority being low inflation. There is general consensus that high inflation is associated with bad economic performance and there is recognition by central bankers that policies aimed at systematically exploiting the short-run output/inflation trade-off to increase output beyond potential are in the long-run always ineffective and self-defeating. There seems to be continued uncertainty in some circles as to the Reserve Bank’s primary objective. I have mentioned the Bank’s primary objective many times before but it seems to need regular restatement. According to the Constitution "the primary objective of the Bank shall be to protect the value of the currency of the Republic in the interest of balanced and sustainable economic growth". By working towards keeping domestic inflation low, stable, and predictable, the Bank contributes towards solid, sustainable economic growth and a higher standard of living for the community. The autonomy and objectives of the Bank are entrenched in the Constitution that specifies that the Bank, in pursuit of its primary objective, must perform its functions independently and without fear, favour or prejudice. The Bank has interpreted this constitutional reason for its existence to mean that it must always strive to achieve and maintain price stability in South Africa. In the pursuance of this objective, the Bank assumes responsibility for, firstly, formulating and implementing monetary policy in such a way that the primary objective will be achieved in the interest of the whole community that it serves. Secondly, ensuring that the South African money and banking system as a whole is sound, meets the requirements of the community and keeps abreast of developments in international finance. Thirdly, assisting the South African government, as well as other members of the economic community of Southern Africa, in the formulation and implementation of macroeconomic policy. And fourthly, informing the South African community and all interested stakeholders abroad about monetary policy specifically, and the South African economic situation in general. In order to avoid global financial crises and the risk of contagion, the international community has been working hard to promote good macroeconomic policies, sound financial systems, and enhanced disclosure so that market discipline can work constructively. To this end, the Reserve Bank participates in the work of the Bank for International Settlements, where central bankers from around the world collaborate in research, and in developing international codes and best practices. The bank also participates in the Financial Stability Forum, an international body that brings together central bankers, regulators, and government officials to address financial stability concerns. It is another example of the Bank’s forward-looking efforts to ensure that we are sufficiently prepared to withstand financial shocks should they occur. The Bank also makes available senior personnel for International Monetary Fund missions to work in other countries. Although the functions of the Bank have changed and expanded over time, the formulation and implementation of domestic monetary policy remains one of the cornerstones of its activities. Over the years the Bank has applied various monetary policy frameworks. From February 2000 an inflation targeting framework was adopted. The adoption of this target formally entrusted a single monetary policy objective to the Bank, namely, price stability. Fully-fledged inflation targeting is based on important pillars that include an institutional commitment to price stability, instrument independence, an absence of other nominal anchors, policy transparency and accountabili