opening remarks by ms fundi tshazibana, deputy governor of the south african reserve bank at the market practitioners group forum 6 november 2020 ladies and gentlemen, good morning and welcome to the market practitioners group ( mpg ) forum. the mpg is a joint public and private sector body that was established by the south african reserve bank ( sarb ) to facilitate decision - making on matters relating to the reform of interest rate benchmarks in our country. since its establishment in october 2018, the mpg has had various interactions with industry stakeholders and has set up substructures to craft the design of alternative interest rates in south africa. the mpg also leads south africa ’ s transition to a new and more robust interest rate dispensation. importantly, the work of the mpg and its substructures, which i will allude to and contextualise shortly, forms part of a global agenda to strengthen existing interest rate benchmarks and identify alternative near risk - free rates. let me now briefly provide some context for those who may not be aware of the origins of the work on the reform of interest rates. in the major financial markets, reference rates, such as the london interbank offered rate ( libor ) and euro interbank offered rate ( euribor ), are widely used as benchmarks for a large volume and broad range of financial products and contracts. these rates encountered episodes of attempted market manipulation and false reporting. this, together with the decline in liquidity in interbank unsecured funding markets after the global financial crisis ( gfc ), undermined confidence in the reliability and robustness of existing interbank benchmark interest rates. page 1 of 4 these developments meant that the lack of integrity in the determination processes of some critical reference rates represented a serious source of vulnerability and systemic risk. as such, the financial stability board undertook a fundamental review of major interest rate benchmarks. in line with global developments, the sarb established the mpg following the publication of the ‘ consultation paper on interest rate benchmarks in south africa ’. the consultation paper, among other things, considered whether there was a case for the reform of the johannesburg interbank average rate ( jibar ) and explored the development of new benchmarks. the case for reforming the jibar, which is the most widely used reference rate in south africa and is therefore of systemic importance, was informed by a number of concerns, including that : i. the jibar is currently not

, pushing public debt ratios higher. and while economies continue to grow in real terms, the experience of the past few years – in particular, their abrupt slowdown in 2015 – highlights the region ’ s vulnerability to external developments, such as swings in resource prices or a rebalancing of china ’ s growth path towards less commodity - intensive demand. finally, while inflation in the first half of 2018 was reasonably benign in the majority of african countries, the sensitivity of consumer price trends to prices of oil and food commodities, and to exchange rate swings – because of the high share of consumer goods that are imported – is a strong reminder that such stability cannot be taken for granted. what will happen next? how will the emerging market situation evolve over the next few months and quarters? in the past couple of weeks, pressure on emerging currencies and other assets has abated to some extent, helped by signals from several central banks indicating that they would not tolerate durable upward shifts in inflation. however, it is too early to predict a stabilisation in emerging market assets, and too early to say with confidence whether the recent market correction will, or will not, turn into a more severe adjustment that could severely undermine growth prospects, and possibly strain corporate and bank finances in emerging countries. at present, many economists are of the opinion that emerging market assets, and especially currencies, are more fairly valued than they were at the start of the year. however, historical experience tells us that ‘ overshoots ’ can often happen, following adjustments similar to what has just been witnessed, and financial assets can face an extended period of volatility before settling around new ‘ equilibrium ’ values. there are, however, some encouraging factors which should limit the risk of a further, severe adjustment. first, as i indicated earlier, growth in advanced economies has remained relatively resilient, much as risks seem tilted to the downside. even in emerging markets, with the exception of argentina, turkey and south africa, growth forecasts have not significantly changed since early 2018 ; hence, the risk that financial market stress in emerging countries could negatively ‘ spill back ’ into the advanced economy growth outlook still appears, for now, to be low. importantly, too, much as the risk remains, we are not witnessing the kind of inflation pressures that might force the world ’ s major central banks into a significantly faster pace of policy tightening – potentially derailing economic expansion. while both headline and core inflation are at present higher in