, it seems that we were heard. the fras declined and reflected a high probability that the repo rate would be reduced before the end of the year, but expected the rate cut to come later. but it is again important to stress that this was not a commitment to lower interest rates. rather, it was a signal that should the circumstances arise, we would be prepared to act. the reason for the signal was that we believed that the probability of this scenario unfolding was not negligible. and our concerns about the global economy were expressed strongly in our statement. at the subsequent meeting, we felt that the inflation and growth dynamics had changed sufficiently to justify further monetary accommodation. since then, there has been much speculation as to whether the interest rate reduction was the beginning of a new interest rate cycle or whether this was a one - off move. at the beginning of an interest rate cycle, it is easy to forecast and signal the direction and timing of the next move. but the turning points are always more difficult to call. we view the recent move as part of the easing cycle that began in the wake of the crisis. we had previously thought that we were at the bottom of the interest rate cycle, but events unfolded in an unexpected way. further easing, however, cannot be taken for granted and will be contingent on changing global conditions, further inflation and growth developments. i should emphasise that it is also important for the markets to pick up the signals from the changing fundamentals in the economy. if the fundamentals or circumstances change all of a sudden, this may lead to a change in policy. but our reaction should only be a surprise to the market if the market has not interpreted correctly how the initial surprise will impact on bank thinking. of course, if we act in an inconsistent way, then we would create further uncertainty. that would not be our intention. but there may be times when our signals may have been misinterpreted, and it may then be necessary to correct that misconception. the central bank must have credibility and act in a consistent manner in response to various shocks, as far as is possible. and part of successful communication would be that markets, analysts and bis central bankers ’ speeches yourselves would expect us to respond to significantly changed circumstances, and would not be surprised when we did so. however, central bank communication is not the only source contributing to market expectations of monetary policy. herve hannoun of the bank for international settlements, for example

note, which will co - circulate with the current note, and is of equal value. we count on your support to help ensure an informed public, so that we protect the integrity of our currency. thank you for inviting me tonight, and for enabling an ongoing conversation in the very challenging times we live in. references ahamed, l. 2009. lords of finance : the bankers who broke the world. penguin books. akerlof, g. and r. shiller. 2009. animal spirits : how human psychology drives the economy, and why it matters for global capitalism. princeton university press. aron, j. and j. muellbauer. 2009. the development of transparent and effective monetary and exchange rate policy. in south african economic policy under democracy, ed. j. aron, b. kahn and g. kingdon, oxford university press. blinder, a. 2004. the quiet revolution : central banking goes modern. yale university press. fromm, e. 1976. to have or to be? harper and row. goodhart, c. 2012. longer term forecasts are a step backwards. financial times, 1 february. hannoun, h. 2012. monetary policy in the crisis : testing the limits of monetary policy. speech to the 47th seacen governors ’ conference, seoul, 13 – 14 february, bank for international settlements. issing, o. 2012. central banks – paradise lost. cfs working paper no. 2012 / 06, centre for financial studies. reid, m. and s. du plessis. ( 2010 ). loud and clear? can we hear when the reserve bank speaks? south african journal of economics 78 ( 3 ). bis central bankers ’ speeches