Monetary stability relates directly to the stability of the price level and the value of the currency and speaks directly to the mission of the South African Reserve Bank (SARB). Traditionally, the main objective of central banks – often enshrined in the constitutions of countries – has been to ensure price stability.
For the Bank this responsibility is defined as “to protect the value of the currency in the interest of balanced and sustainable economic growth…”. It was commonly believed that if central banks could achieve price stability (defined as a target rate or target range of inflation), financial stability would automatically follow. This assertion was found to be incorrect!