weakening not only to the dollar, but also to other advanced economy currencies, such as the euro and the yen. but admittedly others have been tested a lot more when compared to south africa. a key risk to the outlook on the rand remains the possibility of accelerated monetary policy tightening by central banks in the advanced economies, particularly in the us. escalating trade conflicts and geo - political developments, present another risk factor that needs to be monitored carefully. page 4 of 8 the impact of trade conflicts could result in decreased demand for south african exports and potentially higher volatility in currency markets. key initiatives to strengthen the domestic markets let me turn to the two major initiatives undertaken by the sarb to strengthen domestic financial markets. the first one relates to a consultation paper on selected interest rate benchmarks in south africa that we will be releasing in the next few weeks. this initiative partly emanates from a coordinated response by international regulators and central banks, to the instances of attempted and actual manipulation of key global interest rate benchmarks and reference interest rates, in particular the london interbank offered rate in 2012. consequently, the official sector steering group1, established under the auspices of the financial stability board, recommended that interest rate benchmarks should be underpinned by transaction data and that risk - free interest rates benchmarks should be developed to support certain financial instruments, including derivative contracts. this initiative was also informed by research conducted into the robustness, representativeness and sustainability of the johannesburg interbank average rate ( jibar ), given its wide usage as a reference rate in south africa, especially the 3month jibar. the research indicated some shortcomings in jibar, which do not allow it to fully perform its role as a key indicator of underlying market conditions. the majority of floating interest rate securities and derivatives contracts are linked to the three - month jibar, which underscores jibar ’ s importance in the transmission of the sarb ’ s monetary policy stance through the financial market channel. this work is not limited to the jibar, but covers selected other interest rate benchmarks in south africa. following the release of the consultation paper containing certain reform proposals, there will be a two - month period for comments, to be followed by a final implementation document in due course. in july 2013, the financial stability board ( fsb ) established the official sector steering group, which comprises senior officials from central banks and regulatory agencies, to focus on the fsb ’ s work

the current hiking cycle, the first leg of monetary policy transmission – to financing conditions – has been very strong. compared with previous hiking cycles, firms'lending rates have increased at a faster pace and credit volumes have weakened more markedly. transmission to the bank lending channel is likely to continue unfolding as lenders may become more prudent in light of rising funding costs and a slowing economy. moreover, interest rates on outstanding debt will continue to increase as loans are progressively repriced. all in all, in my view, the transmission of our policy tightening to financing conditions seems to be well underway. the second leg of transmission relates to the way in which changes in financing conditions will affect economic activity, as firms and households adjust their plans for consumption, investment and savings accordingly. the transmission of monetary policy tightening to the real economy is proceeding at a slower pace, with a substantial share of the transmission still in the pipeline. for example, real estate activity has slowed down amid the weakening of property valuations. for the economy as a whole, modelbased estimates continue to suggest that, owing to the typical lags in monetary transmission, the bulk of the impact of our tightening is expected to materialise only in 2 / 4 bis - central bankers'speeches the course of this year and thereafter. 1 the downward impact of our tightening so far on gdp and inflation is estimated to average around 2 percentage points over the 2023 - 25 period, with the strongest effect expected on gdp growth this year and on inflation over the next two years. it is also worth noting that the speed of transmission varies across the euro area. in particular, the transmission to households is likely to be faster in countries where variable rate mortgages predominate over mortgages at fixed rate. at the same time, uncertainties regarding transmission remain, mainly in relation to two sources. first, the current hiking cycle is unprecedented in speed. moreover, it follows a long period of accommodative monetary policy and was accompanied by the recalibration of balance sheet policies, all of which limits comparability with historical regularities. second, the tightening of our policy stance occurred in reaction to an unprecedented constellation of shocks hitting the euro area over the last three years, which had a disruptive effect on economic conditions and the inflation environment. the fact that we are still confronted with the overlapping legacy effects of these shocks may imply that monetary policy transmission is proceeding differently this time around compared with what historical regularities might suggest. the