Address by Mr T.T. Mboweni, Governor of the South African Reserve Bank at the National Consumer Forum Conference to celebrate World Consumer Rights Day, Johannesburg, 15 March 2007 Honoured Guests,Ladies and gentlemen 1. Introduction Thank you for the invitation to address you on the occasion of the celebration of World Consumers Rights Day. As consumers we often forget that we have rights, and it is often said that South African consumers are among the most apathetic when it comes to asserting their rights. Consumers are the reason for the existence of business, and World Consumer Rights Day accordingly deservers our support. The relevance of the theme of this conference; “holding the public and private sectors accountable” is without question. The South African Reserve Bank plays an important role in the South African economy, and our actions impact directly on consumers. It is therefore essential that institutions such as the South African Reserve Bank are fully accountable to consumers for the autonomy they enjoy. In my address to you this afternoon, I will expand on the role of the South African Reserve Bank, particularly with respect to the consumer, and, in line with the theme of the conference, I will highlight our efforts to ensure full accountability. 2. Monetary policy and the consumer The South African Reserve Bank, like central banks in other countries, has a unique position in the economy. The operations of the Bank are governed in terms of the South African Reserve Bank Act, its associated regulations and the Constitution of the Republic of South Africa. The Act and regulations describe the framework and structure of the Bank, the way in which it is managed and the actions it may take. The Constitution prescribes that the objective of the Bank should be the protection of the currency in the interest of sustainable economic growth and development. The Bank interprets this mandate to be the achievement and maint enance of price stability. In February 2000 an inflation targeting framework was adopted in South Africa with the inflation target being set by the Government. The Bank, therefore, in line with most inflation targeting central banks, does not have goal independence. However, in its pursuit of this target, the Bank is guaranteed operational or instrument independence. In other words, we can apply our interest rate policy without interference from government. In terms of our mandate, we have to keep CPIX inflation, (i.e. headline consumer price inflation excluding mortgage interest costs) between 3 to 6 per cent per annum on a continuous basis. In carrying out our mandate, we have a direct impact on the consumer through the impact of monetary policy on inflation and interest rates. The question we are often asked is, why target inflation? Low inflation is in the interest of all South Africans, irrespective of whether they are consumers, business people, or retirees. Inflation, which is a continuous increase in the general price level, implies a continuous decline in the value of money, which implies an erosion of the purchasing power of consumers. The Bank aims to limit such a decline by achieving price stability. However, it is important to note that price stability does not imply that the prices of goods and services do not change at all. Relative prices in a market economy will always change in response to changes in relative scarcities, for example after a drought, food prices are likely to increase.  It is also generally the case that those consumers most vulnerable to the ravages of inflation are the poor. The wealthy members of society are in a better position to hedge against inflation for example by borrowing money to buy non-monetary assets. The wealthy often have assets that can more easily be protected against expected inflation. Inflation has other adverse effects such as the distortion of the tax system, and also results in increased uncertainty which makes economic decision-making more difficult. High inflation is usually also accompanied by greater price variability. The confusing price