his colourful narrative “ lords of finance ”, liaquat ahamed describes central banks as “ mysterious institutions, the full details of their inner workings so arcane that very few outsiders, even economists, fully understand them ”. karl brunner, writing in the early 1980s, rather unflatteringly referred to the “ mystique ” of central banking that “ thrives on the pervasive impression that central banking is an esoteric art … the esoteric nature of the art is moreover revealed by an inherent impossibility to articulate its insights in explicit and intelligible words and sentences ”. similarly, when a us senator said that he understood a comment made by federal reserve bank chairman alan greenspan, greenspan famously replied : “ if you understood what i said, i must have misspoke ”. however, greenspan was in fact at the forefront of what alan blinder called the “ quiet revolution ” or the opening up of central banks during the 1990s. as recently as the early 1990s, the federal open market committee ( fomc ) of the us fed would meet and not in fact announce its monetary policy decision. market watchers would then have to deduce from the fed ’ s actions in the money markets what the stance of monetary policy actually was. the “ quiet revolution ” is in fact about central banks not being so quiet anymore, and central banks are now anything but arcane. transparency and its corollary, communication, have become fundamental to central banking operations and strategy. the south african reserve bis central bankers ’ speeches bank has not been left behind in these developments, with a marked evolution towards greater transparency and more open communication, particularly since the introduction of inflation targeting in 2000. there are two broad thrusts to our communication. the first is to create greater awareness about what the bank does, what it should do, what it cannot do, and what it should not do. the second relates to the predictability and transparency of monetary policy. i will make a few comments on both of these issues. with respect to communicating what the central bank does, this is particularly important in the current climate of heightened global uncertainty and fragility. central banks are being viewed as having powers way beyond their capabilities, and as more and more governments hit fiscal constraints, central banks are seen, in my view somewhat unreasonably, as the saviours of last resort or of only resort. central bank mandates are becoming increasingly blurred as they are expected

money - market rates and to resolve liquidity issues. although markets have retraced following the fed ’ s decision not to taper after all, it should be remembered that this is only a delay, and has helped to buy time for emerging markets to prepare as best as they can for when tapering actually takes place. emerging markets that defended their currencies during may and june of this year through the sale of foreign exchange reserves, have rebuilt these buffers, reflecting a resumption of significant capital flows into emerging markets. countries such as mexico, turkey, brazil, south korea and indonesia, have in the past two months erased losses in foreign exchange holdings that totalled about us $ 40 billion between april and july, according to data from jpmorgan. in addition, china appears to have added about us $ 163 billion in the third quarter, bringing its stock of reserves to a record us $ 3. 66 trillion. 2 south africa studied what other emerging markets were doing, but given its own particular circumstances deemed it not appropriate to tighten policy during that period, nor to implement any measures aimed at the foreign exchange market. 4. outlook clearly, asset purchase tapering by the fed has been put on hold for now, but this will surely commence at some point. is there need for alarm over emerging markets in light of tapering and is the slowdown in emerging markets really that severe? the imf ’ s latest global financial stability report3 ( gfsr ) poses the question of what would happen if flows reversed more sharply in emerging markets? the gfsr suggests that while emerging markets may have become more vulnerable, they are also in a much better position than prevailed at the time of the 2008 crisis. in the 12 weeks following the reversal of risk sentiment during may 2012, assets under management for emerging market fixed - income funds fell by 7. 6 per cent ( or us $ 19 billion ), much smaller than in 2008, when assets under management fell by 36 per cent ( or us $ 26 billion ) during the first round of the asset sell - off in september – october 2008, although the impact on local currency bond yields was similar across the two episodes. emerging market countries have come a long way in the last two decades and are not as fragile today as they would have been in the past. foreign exchange reserve levels are much higher ; monetary policy has greater credibility and there is a better track record of managing inflation ; while fiscal positions are healthier than in many advanced