the repeated downward revisions to our estimates of potential growth. this last problem requires structural reforms rather than a monetary policy response. our most recent estimates show potential growth remaining under 2 per cent into 2018 ; this is well below the rate needed for meaningful per capita increases in income and faster job creation. lately, there has been speculation about the end of the hiking cycle possibly having been reached. while the recent improvements to the inflation outlook are a positive development, the risks in the policy environment remain too numerous to be able to say definitively that the hiking cycle is over. we will continue to be guided by the evolving data and our collective understanding as the mpc of what any new data and information suggests for the inflation trajectory. monetary policy and long - term growth this brings me to my second question, about the role of monetary policy in fostering longterm economic growth. it is now widely accepted that the appropriate role of monetary policy is in focusing on price stability in the medium to long run. it can also assist in smoothing short - term growth fluctuations provided that this does not compromise price stability. monetary policy helps to provide a stable, growth - friendly environment but it is most effective if the broader environment is similarly geared towards encouraging investment and unlocking growth potential. in south africa, we have made progress with alleviating infrastructure constraints over the past few years but now – as in the majority of emerging markets – we urgently require structural reforms. without reforms, growth will not accelerate significantly – irrespective of the appropriateness of monetary policy settings. structural reforms required refer to, for example, policies aimed at increasing competition in product and labour markets. many south african sectors are highly concentrated and the barriers to entry for small or new firms are high in an environment dominated by a few longestablished firms. small firms tend to be relatively more labour intensive than large firms, so if the barriers to entry were lowered and more small firms entered the sectors, employment would rise – and it would likely rise faster if this shift were accompanied by labour market reforms. both these policies would not only improve the competitiveness of the economy but also make it more inclusive, providing opportunity for the unemployed, existing small firms and potential entrepreneurs, many of whom are currently locked out of the formal economy. the international monetary fund ’ s recent article iv assessment of south africa reiterates the need for these reforms, which have also been recommended by the world bank and the oecd 5. fortunately, south africa has a long

inflation averaged 11, 2 per cent. since 2002 – the first year in which we committed to a target – inflation has averaged 5, 9 per cent, despite two severe spikes in 2002 and 2008. that said, inflation targeting is still relatively young as a policy, and our inflation rate remains structurally high – higher, in fact, than in other emerging markets and in the countries of rival exporters. 11 it is thus especially important to ensure that expectations in south africa are appropriately anchored. inflation expectations have become much less volatile during the inflation - targeting period, indicating increased trust in the bank ’ s commitment to the target. however, since 2008, when severe food and energy price increases hit south africa, we have suffered exogenous price shocks that have repeatedly driven inflation outside the target range. inflation expectations have shifted upwards as a result. from an average of 5 per cent from 2004 to 2007, inflation expectations 12 rose to average 6, 1 per cent between 2011 and 2013. they have remained stable since then, but are unfortunately stable right at the top of the target the bank for international settlements conducts a triennial survey of global foreign exchange markets. it has found the rand to be the 18th most traded currency globally as of 2013. the johannesburg stock exchange is the 19th largest stock exchange in the world by this measure. see https : / / www. jse. co. za / about / history - company - overview. for example, only 10 per cent of national government debt is foreign currency - denominated. this is south africa ’ s most recent ranking on the global competitiveness index ( 2015 / 16 ). calomiris, c w and haber, s h. 2014. fragile by design. new jersey : princeton university press. the comparison with other emerging markets relies on international monetary fund ( imf ) world economic outlook ( weo ) data for 2001 - 2015. the inflation rate for rival exporters was calculated using imf weo and united nations comtrade data, with a weighted inflation rate calculated for 2011 - 2015 using south africa ’ s nine largest export categories ( 73 per cent of total ) from 2012 to 2014. as measured ( for two years ahead ) by the bureau for economic research. bis central bankers ’ speeches range. a situation where expectations are lower, and the target range is thus more resilient to shocks, provides more flexibility for accommodative monetary. flexible inflation targeting allows us to look through once - off shocks to prices from