the latest data and the short run. concluding thoughts in the past, emerging - market crises tended to centre on currency crises. prominent examples include the tequila crisis of 1994, when mexico devalued the peso, and the asian crisis of 1997 / 98. given these experiences, it is not difficult to imagine the fed tightening, generating further volatility and creating expectations of more emerging - market crises. 8 but emerging markets are in better shape than they used to be, in particular because they have flexible exchange rates. south africa, perhaps more than other emerging markets, has developed a robust track record of enabling the currency to carry the brunt of the adjustment to global volatility. importantly, the low level of foreign - currency liabilities helps to reduce the risk of a sudden sharp crisis and cannot act as a complicating factor in policy decisions. currency adjustment helps the market to find its balance again but also, importantly, works in the direction of the unwinding of macroeconomic imbalances. in other words, in the current conditions of weakening commodity prices, currency adjustment works in line with fundamentals. this helps the real economy to find its own balance and rebound. relative to other emerging economies, let alone the developed markets, our private and public debt levels remain low, a clear advantage as the global economic recovery strengthens further in coming years. in south africa, our task is to maintain our robust macroeconomic architecture, work through the structural reforms necessary for raising potential growth, and ensure that we remain at the forefront of emerging markets. our macroeconomic policy framework remains sensitive to the challenges of global policy normalisation and flexible enough to take advantage of the few opportunities underlying the difficult global conditions of our times. thank you. as discussed in andrew haldane, how low can you go? ( http : / / www. bankofengland. co. uk / publications / pages / speeches / 2015 / 840. aspx ), 18 september 2015 ; see also robert shiller, why do people dislike inflation? ( http : / / www. nber. org / chapters / c8881. pdf ), 1997. see, for instance, nelson d. schwartz, “ watching the fed, and remembering the tequila crisis ”, new york times ( http : / / www. nytimes. com / 2015 / 09 / 19 / business / economy / if - rates - rise - global - markets - fear - effects - of

/ swansong. html ). bis central bankers ’ speeches let me remind you that the rand has depreciated by 16 per cent against the dollar so far this year. we have raised our policy rate by 100 basis points over an 18 - month period. in 1998, before the adoption of inflation targeting, the rand also depreciated by 16 per cent and we hiked rates by 690 basis points in a period of six months. lower pass - through from the depreciation to inflation has also helped to moderate potential policy responses. of course, floating exchange rates are dangerous if domestic borrowers have run up large, unhedged foreign - currency debts. where this is the case, the monetary authority may end up facing only bad choices. one is to use foreign currency to prop up the domestic currency to protect the economy, but this has clear limits and typically fails. the alternative is to step back and let sectors of the economy adjust on their own to the new currency level, implying much higher financing costs. the clear differentiator for south africa against many other emerging markets is that this particular policy dilemma doesn ’ t feature in our decision - making process. renouncing the “ forward book ” and allowing the “ fear of floating ” to wear off over time has limited the extent of foreign - currency borrowing, encouraging the development of our own capital markets and reducing a major risk for non - resident investors in rand assets. 2 when a country adopts a floating exchange rate, the reasons for holding foreign reserves also change. the goal is no longer managing the value of the currency. instead, reserves serve to bolster the national balance sheet, reassuring investors that the country has access to safe, liquid resources even in extreme situations. the use of reserves is therefore very different. the reserves provide insurance, a guarantee that markets will be able to price exchange rates. the fact that emerging markets have accumulated many more substantial reserves than they held, for instance, in the 1990s or early 2000s, suggests that markets will be able to function in more orderly ways, and that large, long - term investors will feel comfortable trading in those markets. monetary policy the exchange - rate policy fits within the broader policy of inflation targeting. inflation targeting provided us with a policy goal more realistic than the previous eclectic approach to policy, because we could hit it. that goal was also more meaningful for citizens, because we could focus on protecting the buying power of regular consumers in domestic markets – as opposed to, say