4 percent at present. 5 rising education levels do point to a decline in the natural rate since the 1960s, because more highly educated people are less likely to be unemployed. the share of the population with a college degree has risen from less than 15 percent in the late 1960s to nearly 40 percent now, and the share with less than a high school degree has declined the natural rate of unemployment is the unemployment rate over the longer term that is consistent with low and stable inflation. it comprises both the “ frictional ” unemployment of people who are temporarily between jobs or searching as they have reentered the labor force and the more “ structural ” unemployment of people whose skills or physical location are not a good match for the jobs available. for more discussion, see janet l. yellen ( 2017 ), “ the goals of monetary policy and how we pursue them, ” speech delivered at the commonwealth club, san francisco, january 18, https : / / www. federalreserve. gov / newsevents / speech / yellen20170118a. htm. contemporaneous estimates of the natural rate ( or “ full employment ” ) from the late 1960s were lower than current estimates for that period. for example, the economic report of the president from 1968 defined potential output as occurring when the unemployment rate is 4 percent. see executive office of the president of the united states ( 1968 ), economic report of the president ( washington : u. s. government printing office, february ), p. 61, http : / / www. presidency. ucsb. edu / economic _ reports / 1968. pdf. - 4from 45 percent to about 5 percent. 6 another important difference from the 1960s is that inflation has been low and stable for an extended period, which has better anchored inflation expectations. today policymakers have a greater appreciation of the role expectations play in inflation dynamics and a clearer commitment to maintaining low and stable inflation. unfortunately, with the passage of a half - century and important changes in the structure of our economy and in central bank practices, in my view the historical comparison does not shed as much light as we might have hoped. questions prompted by a tight labor market the lack of useful historical precedent leaves us with some uncertainty about the answers to several important and challenging questions. first, estimates of the natural rate of unemployment by federal open market committee ( fomc ) participants and others have drifted lower as unemployment has declined without much apparent reaction from inflation. how reliable

an address by lesetja kganyago, governor of the south african reserve bank, at the 5th sa tomorrow investor conference new york 9 november 2017 good morning, ladies and gentlemen. thank you for the opportunity to address this important conference today. as many of you will know, the south african economy faces some major challenges. economic growth is weak and unemployment remains high despite favourable terms of trade and a robust global recovery. we have good ideas for addressing these problems, but regulatory and policy uncertainty as well as corruption and a lack of direction in some areas have all sapped consumer and investor confidence and weakened private - sector investment. it should not be a difficult task to turn things around. setting out some investment - friendly ambitions for the economy and reducing political uncertainty would go a long way towards boosting confidence. as is often said, raising confidence is the cheapest form of stimulus. given the economy ’ s poor performance, there is an understandable focus on the negatives – but we should not forget that there are also positives. i will touch on these during my address today, particularly on those that impact directly on the work of the south african reserve bank ( or sarb ). these include a much smaller current account deficit, which has made the rand more resilient to risks. there has also been some moderation in inflation, which has eased the near - term pressure on monetary policy. given our enhanced focus on keeping inflation expectations low, this could extend well into the future. page 1 of 9 current account rebalancing four years ago, south africa was counted as one of the fragile five, along with brazil, india, indonesia, and turkey. these were all countries with weak external positions, which seemed vulnerable to shifting capital flows. in particular, all five experienced sharp currency depreciations after the fed 1 signalled that it could tighten policy faster than the market then expected – provoking the so - called ‘ taper tantrum ’. the impact of this shock was that south africa focused on the need for rebalancing. at the time, the fiscal deficit ( for 2012 / 13 ) was 4. 3 % of gdp 2 while the current account deficit was unsustainable at nearly 6 % of gdp ( - 5. 88 % in 2013 ). the combined twin deficits were just over 10 %. monetary policy was fairly loose : with a repo rate 3 of 5 % and an inflation rate close to 6 %, our real interest rate