Nevertheless, I believe that more must be done in this field, especially since at least some parts of the world economy have seen something of a productivity shock in recent years. I am deliberately avoiding the buzzword “new economy” here, since history has been full of expressions like that ever since the turn of the 19th century. The discussion about monetary policy and a productivity shock is taking place mostly in the United States, in the light of the impressive economic performance there and the acceleration in the rate of productivity growth. So one could certainly ask: what about the rest of the world? The possibility of a productivity breakthrough also in other parts of the world cannot of course be ruled out. Higher - or accelerating - productivity growth does indeed pose new challenges for monetary policy. It could set in motion a complex of effects on aggregate supply and demand, on inflation, equity prices and interest rates. Just to give a few examples, let me briefly mention the following effects. First, a positive productivity shock raises the economy’s potential growth rate. It also affects aggregate demand through new, profitable investment opportunities, higher equity prices and expectations among households of higher permanent income. One question for policymakers is whether the demand effects are so powerful that they have the potential to outpace the growth of aggregate supply in the short and medium perspective. Second, there could be temporary disinflation effects at work if the increase in productivity is unexpected initially.
Inflation has fallen to single digit, while the exchange rate has remained relatively stable. In 2011 inflation closed at 7.2% from 7.9% in 2010. In February 2012, inflation was recorded at 6.0%;  iii. The financial sector has also recorded tremendous growth since the commencement of liberal economic and financial policies in the early 1990s; and  iv. Equally, positive developments have been registered in the payment systems. I must caution though that sustaining macroeconomic stability remains a key challenge in the face of a weak global economic outlook and limited domestic resources. It is important that we all keep an eye on economic developments with a view to striking a balance between wealth redistribution on one hand and sustaining the required investment and economic growth on the other. Ladies and gentlemen, in the recent past, we have witnessed a number of work stoppages as workers press for increased remuneration. In this regard, I wish to urge the Union leadership to be wary of sparking a wage price spiral because this may cause a rise in inflation. As you may be aware, high inflation is detrimental to our economy because of the following reasons: i. Makes Planning difficult for economic agents;  BIS central bankers’ speeches  1  ii. Companies and consumers are unable to draw up effective investment and expenditure plans;  iii. Government is also unable to make good projections of revenue collections and thus unable to effectively plan its current and capital expenditures;  iv.