2014 to mid - march 2015 ( since then, however, the us dollar has depreciated by about 5 per cent until 5 june 2015. ) market analysts ’ models were showing that the us dollar performance was consistent with an actual 100 bps increase in the us policy rate. this new form of long - term refinancing operations, amounting to eur400 billion, was designed to provide funding to banks at 10 basis points above the main refinancing rate for as long as four years, subject to meeting certain loan criteria. bis central bankers ’ speeches us dollar appreciation, such as safe - haven buying due to geopolitical developments or greece exiting the euro. historical patterns since the early 1970s show excessive us dollar appreciation during the periods coinciding with the two aforementioned fundamental variables, such as during 1983 – 84 and the late 1990s. therefore, actual us policy normalisation could result in further weakness in the rand against the dollar, and could also negatively impact on portfolio flows by reducing the willingness of fund managers ( a large share of them having us dollar liabilities ) to hold unhedged positions in south african bonds and equities. at the same time, a weaker exchange rate would probably raise implied rand volatility, adding to overall risk aversion and weak sentiment towards rand - denominated assets. allow me to point out, however, that, unlike previous episodes of rand depreciation, the nominal effective exchange rate of the rand has been reasonably stable since the beginning of 2014, and, relative to baskets of commodityexporting or large emerging - market economies, the rand has regained some of the ground it had lost in earlier years. nonetheless, exchange - rate developments continue to pose the single biggest risk to south africa ’ s inflation outlook. sharp movements in the rand - dollar exchange rate have translated into large swings in the reserve bank ’ s inflation forecasts. between the monetary policy committee ( mpc ) meeting at the end of 2014 and its subsequent meeting in march, inflation forecasts had changed substantially, initially reflecting a significant improvement as a result of the decline in oil prices, then changing to a less favourable outlook in march owing to adverse exchange - rate developments. such swings complicate the task of monetary management. for south africa, the favourable impacts of a weaker currency on the current - account deficit have not been forthcoming, which is a concern in the current international environment of volatile capital flows. while there has been some narrowing in the

t t mboweni : the outlook for the south african economy in a period of uncertainty address by mr t t mboweni, governor of the south african reserve bank, at the london capital club, london, 27 june 2006. * * * ladies and gentlemen, 1. introduction i was very pleased to have received this invitation to address the members of the london capital club today for two reasons. firstly, i suspect that this club might contain within its history the first seeds of central banking. i believe this club builds on the proud foundations of the gresham club, named after sir thomas gresham. and i was interested to learn that sir thomas was an advisor to king edward vi in 1551 on the financial difficulties facing the country at the time. sir thomas implemented a set of plans to overcome these difficulties, which raised the external value of the pound. in his management of these problems, one can perhaps conclude that sir thomas was one of the first - ever central bankers. indeed, sir thomas might have had an easier task if england had already followed a policy of inflation targeting at the time as both south africa and england do today. the second reason why i am delighted to be here today is that the south african reserve bank has a direct association with the london capital club. one of our former deputy governors, ian plenderleith, cbe, serves on the board of advisors of the club. i am therefore indeed honoured today to make a contribution to your deliberations but, more importantly, to enjoy lunch with you. recent upheavals in the international markets have placed the spotlight again on emerging markets. there is disagreement in the markets as to what this burst of global volatility actually reflects, with answers ranging from inflation concerns, to global liquidity and to the growth outlook. south africa has in the past few weeks experienced significant movements in the rand exchange rate and stock market prices. these developments may be seen by some as a threat to south africa ’ s recent strong growth performance, as well as to the growth strategy of the government. but that should not necessarily be the case. 2. recent international developments emerging markets have enjoyed an extended period of investor exuberance and search for higher yield over recent years, which, combined with a generally supportive environment of strong global growth and high commodity prices, have caused their currencies to appreciate, equity prices to increase and bond spreads to narrow. recently, we have experienced the effects of greater uncertainty about future inflation