After the recent downward adjustment in the financial markets in South Africa, we may find some further slowdown in the rate of increase in bank credit extension, to reflect more truly the slowdown which already occurred in real economic activity. Recent events in the international currency markets proved once again that the forecasting of possible future developments in financial aggregates can be very perilous.
As South Africa liberalises its financial markets further and as the South African financial system gets more integrated into an extremely volatile international environment, the hazards of forecasting will increase. For the central bank, this unfortunately reduces the value of strictly defined monetary policy models, and makes BIS Review 106/1997  -4the task of implementing policies more discretionary.