In the application of inflation targeting in South Africa, it was decided to leave the external value of the rand to the market and not to intervene in the foreign-exchange market to influence the exchange rate. It was realised that this could lead to volatility in the exchange rate of the rand.
Although the Bank would have preferred to operate in an environment characterised by exchange rate stability, cognisance is taken of the fact that fluctuations in the external value of the rand are unavoidable in the current international monetary system of generally floating exchange rates. In these circumstances the authorities can only aim at creating underlying economic conditions that are conducive to exchange rate stability.