somewhat in the fourth quarter of 2010, the improved outlook for economic growth in 2011 could boost the confidence level of consumers in south africa. in the corporate sector, the increase in profitability, as reflected by the gross operating surplus, and the increase in the annual growth rate of credit extended to the sector, are possible indications of a recovery in business confidence. in the property market, property price indicators have been declining over the past year, despite lower interest rates and rising real income. job losses, which negatively affect consumers ’ ability to take up new credit, might have had an impact on prospective homeowners ’ ability to purchase a residence. recent developments enhancing the robustness of the financial regulatory environment in south africa include reviewing the prudential framework for foreign investment by private and public pension funds, reviewing the framework for cross - border direct investment in south africa, the release of the final draft of amendments to regulation 28 of the pension funds act, and reviewing the securities services act as part of a process to consolidate several financial services acts. i have briefly highlighted the key issues raised in the financial stability review. more detailed analyses are available in the publication itself, and will be highlighted by the authors ’ presentations. i trust that you will find these interesting, stimulating and relevant to the current environment and invite you to provide comment as part of the important process of ongoing debate on financial stability. thank you bis central bankers ’ speeches

somewhat slow to act as a shock absorber or adjustment mechanism to provide support to the trade account and the balance of payments. south africa ’ s current account deficit widened from 2. 8 per cent of gdp in 2010 to 6. 3 per cent in 2012. the trade deficit grew on account of increased imports related to the infrastructure investment programme, and lacklustre exports, as well as declining terms of trade. the depreciation of the rand exchange rate resulted in a deterioration in the bank ’ s inflation outlook, and the targeted measure of inflation increased from just below 5. 0 per cent in august 2012 to 6. 4 per cent in august 2013. still, however, there was little evidence of any demand pressures, with much of this increase driven by cost push factors. it is the improvement in growth prospects for advanced economies, in particular the us, that saw the rand again recouple with global developments on talk of asset purchase tapering. expectations of tapering had a profound impact on financial markets of both advanced economies and emerging markets, but more particularly for the latter as it is deemed that such a withdrawal of stimulus will negatively impact on portfolio flows to emerging markets. indeed, capital inflows retreated somewhat, and in south africa we witnessed a pull - back especially in bond inflows. during may and june this year, we witnessed a net outflow of over r17 billion from our bond market although this was partially offset by equity inflows. from the beginning of may the rand exchange rate depreciated from r8. 90 against the usd to levels of r10. 40 in august. a number of central banks in emerging markets reacted quite differently to these movements, with some tightening monetary policy despite an evident slowdown in growth, others intervening in the foreign exchange market and others draining liquidity in local markets. the central bank of brazil has since april this year, increased its policy rate by a total of 225 basis points to 9. 5 per cent due to inflation pressures and to shore - up the currency and limit capital outflows, while also lifting previous taxes on capital inflows. the central bank in indonesia increased the policy rate by 150 basis points thus far in 2013 to bis central bankers ’ speeches 7. 25 per cent, but in emerging europe we have seen various interest rate reductions. 1 the people ’ s bank of china ( pboc ) reacted by initially tightening liquidity conditions, only to be relaxed soon thereafter to reverse a substantial increase in