, 2 per cent of gdp in 2015, and around 4, 6 per cent next year. with the balance of foreign direct investment flows in deficit, on average, over the past year and a half, this means a continued reliance on portfolio inflows to ensure a smooth financing of the current - account deficit. generally, portfolio flows into south african assets do not behave differently from those into other major emerging markets. iif portfolio tracker data show a positive correlation of 56 per cent in the current year, and indeed since 2010, between net non - resident flows into south africa and into emerging markets as a whole. non - residents became net sellers of south african bonds and equities in the last three months, coinciding with an underperformance of the domestic bond market and renewed rand weakness. we have noted that for emerging markets as a whole, there seems to be an increased correlation between the performance of local - currency bonds and the exchange rate. this observation also applies of late to south africa, providing further evidence of the linkages between bond flows and currency trends. furthermore, the same data also show that in the past few years net flows into south african securities have become increasingly sensitive to shifts in the us yield curve. since the “ taper tantrum ” of may 2013, months when 10 - year us treasury yields rose by more than 10 basis points coincided with net non - resident outflows from south african bonds, whereas other months saw net inflows. equally, the period since may 2013 has seen, on balance, a negative correlation between us treasury yields and the performance of the rand, in contrast to what prevailed in the immediate years after the recession. at that time, rising us yields may have been perceived as signalling a stronger global recovery. nowadays they appear reflective of tighter global financial conditions, with negative implications for the south african rand. the risk of a negative “ feedback loop ” between us yields, outflows from domestic bonds and rand depreciation is therefore real. op. cit., page 2. bis central bankers ’ speeches the challenges of a slowing south african economy the prospective normalisation of monetary policy in the us, with the possible implications i have just described, comes at a challenging time for south africa and for monetary policy. on the one hand, underlying inflation trends and inflation expectations are already relatively high, and the potential for sizable portfolio outflows and ensuing currency depreciation clearly poses an upside risk to the inflation outlook. on

an alarmist scenario as exaggerated. in any case, rather than adjusting the voting mechanism, it would be better for the eurosystem to confine itself once again to its proper and primary task : managing monetary policy with the aim of ensuring price stability. the redistribution of risks is a task for fiscal policymakers, who have the necessary democratic legitimacy and are answerable to parliament and, ultimately, to the voters. that is straight out of the central banking text book. but in reality, risks will be redistributed and our representative will be outside the room. what matters is taking part in the meetings where decisions are made – all members of the ecb governing council are always present and entitled to contribute to the discussion. and the concerns that many people express – the implications of central bank measures for us as taxpayers and for price stability – cannot be allayed by changing the voting mechanism. bis central bankers ’ speeches you have often been a lone voice anyway in many of the decisions made by the ecb governing council. why have you not been able to make your views prevail in the past? in such a fundamental debate about the role of monetary policy, a number of factors play a role, one of which is doubtless the national traditions and history that shape each and every one of us. but nor can one always escape the influence of the economic situation in one ’ s own country. it makes a difference whether 50 per cent of young people are out of work back home or whether there is almost full employment. however, i do not have the feeling that my arguments are not coming across in the discussions. many of my concerns are shared by colleagues on the governing council. you are the only one voting against! that is far from being true of all decisions. however, when it comes to measures which might be seen as monetary financing of governments, i believe it is particularly important to take a principled stand. but even then the majority on the governing council factors into its decisions concerns which i have put forward. and if you want to mop up the flood of money, the others say : we would rather have five per cent inflation than five per cent unemployment? you seem to be suggesting that my colleagues are not sticking to our mandate. we all feel duty - bound to price stability. and according to our most recent projections, the inflation rate is likely to fall back to below 2 per cent in the next two years. to ensure continuing price stability thereafter, we will have