to be the first of the advanced economies to begin raising interest rates. the us tightened policy in december 2015 but it has remained on hold since then, while the uk has recently reduced rates further. unfortunately, this highly expansionary monetary policy environment has not generated the growth that was hoped for, but it can be argued that it prevented the immediate situation from getting worse. i should note that there are potential negative effects from very low or indeed negative interest rates, not least of which is that they create problems for defined - benefit pension funds which have to provide cover for ageing populations while many of these funds face the risk of underfunding. the amount of government debt trading at negative yields has increased significantly since the beginning of the year. pension funds are therefore forced to search for higher yields and, almost by definition, they move their funds to more risky investment categories and jurisdictions. this is a potential time bomb waiting to explode, far more serious than the concerns over the potential inflation risks of ultra - loose monetary policy. in fact, inflation is not currently a concern in the advanced economies, and in some instances the concern is that inflation is too low. the situation in emerging markets and developing economies is more complicated, particularly in those that are currently facing rising inflation and slowing or low growth. these inflation pressures have typically been driven by weakening exchange rates in response to declining commodity prices – and not by excess demand where monetary policy is most effective. this is the case in south africa at the moment. our economic growth outlook is weak following the contraction in the first quarter of this year. the south african reserve this is when short - term nominal interest rates are at or near 0 per cent. a liquidity trap is caused and the effectiveness of monetary policy is limited. this is due to the existence of physical money. as interest rates fall below 0 per cent, economic agents may switch from central bank money or electronic cash to physical cash. bis central bankers ’ speeches bank forecasts 0 per cent growth this year and below - trend growth of just 1, 1 per cent and 1, 5 per cent in 2017 and 2018, respectively. at the same time, inflation is outside our target range of 3 – 6 per cent and is expected to remain outside the range until the third quarter of 2017. however, demand pressures are weak while inflation is driven primarily by supply - side factors, including drought - induced food price increases, a relatively depreciated currency, and administered prices. none of this means that monetary policy

' s business was eventually sold off to other institutions, while a second medium - sized bank was acquired by one of the big four banks. this episode tested numerous depositors'and bankers'nerves to the extreme ; many elderly investors now choose to keep their deposits with more than one institution, which is a wise move. 4. financial markets south africa's financial markets are robust, liquid and well - developed. turnovers remained brisk in 2002 to date. in the bond market, for example, the value of turnover in a single month is approximately equal to south africa's annual gross domestic product of one trillion rand. non - residents also take a keen interest in these markets. in an average month non - residents buy more than a r100 billion in bonds and r18 billion in shares on our bourses. they of course usually sell bonds and shares of a roughly equal amount, but some net inflow or outflow is recorded from month to month. during the first half of 2002 nonresidents bought a net amount of r13 billion in shares and bonds on the south african formal exchanges, but sold r17 billion during the third quarter. further net sales in october were followed by net purchases in november. predicting foreign portfolio capital flows is clearly dangerous, only to be surpassed by bargaining on net inflows from that source. south african share prices performed well up to may 2002, but then fell back sharply, partly in sympathy with foreign bourses as enronitis took hold. in rand terms, the jse overall price index is currently 10 per cent down on its value at the end of last year. nonresidents, because of the 24 per cent stronger exchange rate of the rand, nevertheless made substantial profits on the jse in foreign currency terms. those who had invested in south african bonds or real estate in early 2002 of course recorded even better returns, since in contrast to shares those asset prices also rose handsomely in rand terms. but beyond these events on the formalised exchanges involving portfolio capital flows, south africa has an important role to play in the area of foreign direct investment. in particular, numerous direct investment projects into other parts of africa are being undertaken, fitting in under the broad nepad initiative. south africa's involvement ranges from the mozal smelter in mozambique to saa's participation in tanzania, and includes hotels, factories, cellphone operators and shops in numerous countries on the african continent. south africa's investments in