quarter in 2011, and was mostly evident in the mining and manufacturing sectors. gross fixed capital formation, expressed as a percentage of gdp remains low at 19. 3 per cent, compared to the high of 24. 6 per cent achieved in the fourth quarter of 2008. the official unemployment rate increased from 25. 2 per cent in the first quarter of 2013 to 25. 6 per cent in the second quarter. the youth unemployment rate has risen to 52. 9 per cent during the first quarter of 2013 and is of particular concern. the inflation outlook had worsened at the time of our last monetary policy committee meeting and is now expected to be slightly higher at 5. 9 per cent and 5. 5 per cent in 2013 and 2014, respectively. inflation is projected to temporarily breach the target range in the third quarter of 2013, at a slightly higher average level of 6. 3 per cent. the challenge that we face is how best to achieve our primary mandate of price stability against the backdrop of rising inflationary pressures and weaker growth. i should add that a sustained breach of the inflation target is not the bank ’ s central forecast. the monetary policy committee, whilst maintaining the accommodative policy stance by keeping the repurchase rate unchanged at 5 per cent at its last meeting in july, indicated that given the upside risk to the inflation outlook, the scope for further monetary accommodation is reduced. however, tightening of the monetary policy stance does not automatically follow, as a shift will be highly dependent on how we see he inflation trajectory unfolding against the backdrop of the prevailing uncertain environment. the global financial crisis and its impact on financial stability i now wish to turn to the impact of the global financial crisis, particularly its impact on south africa and other emerging markets and the challenges it poses to financial regulation. in particular, i want to underscore the need for more research in an area which has gained pre - eminence since the onset of the global financial crisis, namely the macro prudential approach to financial regulation. there is no doubt that the global financial crisis has permanently changed the course of the global economy and has established a new normal. the severity of the 2008 financial crisis brought about the most damaging effects to domestic economies of the developed countries and possibly the longest lasting negative externalities to the world economy, in history. bis central bankers ’ speeches although the emerging market economies performed better than the advanced economies, they were nonetheless affected through the trade and finance channels and as a consequence their growth rates too

had been negatively impacted. the crisis has forced many central banks to look more closely at the build - up of financial imbalances in the wider financial system and to undertake regulatory reform which has expanded central banks ’ role with regard to ensuring financial stability. the latter is known as the so - called macro prudential regulation and which concerns itself with more than just idiosyncratic risk and the soundness of individual institutions but is concerned with the soundness and stability of the entire financial system, i. e. systemic soundness. fortunately, south africa and its financial institutions fared well during the crisis. our policy makers however appreciated that there was no room for complacency and decided to be proactive. hence in 2007 the national treasury launched a review of south africa ’ s financial regulatory system. this work culminated in the minister of finance publishing a policy document, a safer financial sector to serve south africa better, also known as the “ red book ”. in terms of the reforms outlined in the “ red book ” the south african reserve bank would assume responsibility as macro prudential regulator, micro prudential regulator and resolution authority for the wider financial system. this means that the bank ’ s previous role as micro prudential regulator of banks ( since 1990 ), would be expanded to include prudential regulation responsibility over the insurance sector and all financial market infrastructures, including the payment system, central clearing counterparty and trade repositories. moreover, the bank is also becoming the systemic or financial stability regulator. it is important to note that the bank had been pursuing financial stability since 2001. however, it was an implicit mandate. since 2010, the bank has had an explicit financial stability mandate complementing its price stability objective. this, however, is in line with the mandates of most central banks around the globe. in pursuit of this expanded role, a financial stability oversight committee ( fsoc ), chaired by the governor, will be established which will include representation from the bank, the market conduct regulator and the national treasury. the fsoc will have financial stability policy responsibility, in the same way as the monetary policy committee does for price stability, and will be able to hold to account various authorities or economic agents on actions to be taken to mitigate against / reduce systemic risk. research underpinning of the work of the sarb as systemic regulator the immediate challenge of the fsoc which is the same for other financial stability regulators around the globe, would