Review of Monetary Policy in South Africa: 1994-2004

This paper examines the evolution of monetary policy in South Africa in 1994-2004 in terms of design, the operational framework, the South African Reserve Bank?s (SARB) understanding of monetary policy transmission and the transparency, credibility and predictability of monetary policy. Quantitative indexes of transparency in 1994 and 2004 are compared and expectations data and forward interest rate data used to assess the credibility and predictability of policy under inflation targeting. The forecasting performance of the SARB is evaluated, and monetary policy decisions taken in response to external and domestic shocks assessed. The impact of monetary policy on the level of real interest rates and the role for complementary policies are examined.