Challenge number three - establishing an effective institutional framework for monetary policy There is a lot of misunderstanding in South Africa about what is meant with the independence of the Reserve Bank. The Bank can never be made responsible for determining the overall macroeconomic policy objectives of the country. This is a prerogative of government.
The adequate support of other policy instruments is fundamental to minimize costs for the economy. 7. A flexible exchange rate mechanism can play a crucial role to achieve a smoother adjustment to external shocks.