boosting measures, such as subsidies for car purchases, implemented in many countries to address the financial crisis almost ran their course. since the autumn of 2010, the global economy has gotten out of the temporary deceleration phase and its growth rate has started increasing again. looking at the developments by region, the growth in emerging and commodity - exporting economies has started accelerating again since the autumn of 2010. consumption has been buoyant associated partly with improved household income and growth in investment has been high in a broad range of areas including social infrastructures, such as roads and railways, and factory machines and equipment. in addition, on the back of large - scale monetary easing in advanced economies, funds that could not find profitable investment opportunities in their own economies have been flowing in. that has been stimulating bis central bankers ’ speeches economic activity through asset transactions and investment, which has also induced economic expansion in emerging and commodity - exporting economies. looking at the developments in advanced economies, the u. s. economy has been recovering moderately. exports, especially to emerging economies, have been increasing, and as for private consumption, christmas sales in 2010 marked the highest growth since the mid - 2000s. while pessimistic views on the prospects for the economy heightened in the summer of 2010, they have rapidly subsided and rather, optimistic views have become prominent, partly reflecting federal reserve ’ s large - scale accommodative monetary policy and fiscal measure of the extension of tax cuts. in that situation, stock prices have been rising. in europe, countries called peripheral ones such as greece and ireland have confronted severe fiscal problems, which i will refer to later, and have been forced to make a difficult economic policy maneuver. by contrast, major economies such as germany have been strong due mainly to the increase in exports to emerging economies. economic activity in europe as a whole has continued to recover moderately, with some differences in pace by country as i have just explained. my projection is that the global economy is likely to continue to record relatively high growth led by emerging and commodity - exporting economies that will continue growing rapidly. the international monetary fund projects that the global economy, following a 5 percent growth in 2010, will grow at a high rate of more than 4 percent in 2011 and 2012. the figures are comparable to those during the historical high growth period that had continued for several years prior to the 2008 financial crisis. uncertainties over the outlook of the global economy the projection i have just noted entails various uncertainties

opportunity of increased flows to emerging markets to strengthen its foreign reserves position. these developments have complicated the formulation and implementation of monetary policy by central banks, in particular in emerging markets. globalisation of financial markets has to some extent blurred the conventional ways in which markets react to monetary policy. as a result, the extent and direction of changes in asset prices in response to changes in monetary policy are becoming increasingly uncertain. for example, while conventional unhedged interest - rate parity theory predicts that exchange rates should strengthen when interest rates are increased, the south african experience of late showed that the opposite is just as likely. during the current tightening cycle, the south african rand on more than one occasion weakened when interest rates were increased, and appreciated when interest rates remained on hold. clearly, in these instances global investors ’ views about the impact of rates on the growth trajectory overruled other influences and conventional relationships. the build - up of carry trades globally has been mentioned earlier in this address as a current example of imbalances caused by different monetary policy stances among countries, within the context of globalised financial markets. the extents to which carry trades are conducted globally amplify the effects of relative changes in asset prices – not only for the high - yielding investment destinations, but also for the relatively low - yield origins of funding. carry trades in their broadest sense comprise any investment made with borrowed funds. short positions in low - yielding financial markets or instruments are typically used to fund long positions in high yielding markets or instruments. in practice, such funding can take numerous forms in the money, capital and derivatives markets across the world, making it very difficult for an individual government agency or central bank to obtain an exact indication of the extent of these trades in the domestic market. there is also much uncertainty about the triggers that could reverse carry trades, and the speed with which they could be reversed. these are all factors that add to the uncertainty of central bankers about the likely effects of their policies on financial markets and asset prices. a similar “ black box ” of uncertainty that can have an impact on monetary policy is the activities of hedge funds in global financial markets. we know that hedge funds influence markets in significant ways, but find it very difficult to determine exactly to what extent. although the term is loosely used, it is not always clear which institutions should be referred to as hedge funds : traditional fund managers and so - called hedge funds seem to be moving closer together in their strategies and activities. also,