Thus, while it is natural for an economic slowdown to have adverse effects on Member States’ budgets, it is important that especially those countries with a budget position still not close to balance or in surplus and/or with high public debt-to-GDP ratios adhere to their medium-term consolidation plans.
The most important contribution the Reserve Bank can make to this task is to keep inflation low and stable, so that firms can respond to the shift in relative prices without their decisions being distorted by concerns about inflation in the general level of prices. The inflation targeting regime that we have had for nearly two decades provides the right framework to do this.