the pressing maintenance needs if supply safety and quality are to be secured. the mpc also sees risks of a pickup in food prices in the outer years of the forecasting period. in addition, any unresolved domestic policy uncertainties could trigger exchange rate volatility even in the absence of external shocks. page 7 of 9 the south african reserve bank ’ s reaction and policy mandate following its decision to hike the policy rate by 25 basis points at the november 2018 meeting, the mpc felt that the inflation backdrop and outlook had improved sufficiently enough to warrant keeping the policy rate unchanged at the january meeting. while the mpc still judged the policy stance as broadly accommodative, the endogenous rate path generated by the qpm now only entails one hike of 25 basis points in the policy rate, to 7. 0 % by the end of 2021. as previously indicated, this does not represent policy guidance nor commitment. the mpc will remain alert to any possible secondround price effects of potential shocks and stands ready to act accordingly should data indicate a shift in the inflation outlook and the risks thereto in either direction. it has at times been suggested that the sarb should place greater emphasis on growth and employment objectives, or even that its mandate should be modified to make such objectives clearer. these suggestions may miss the key channels through which monetary policy best serves the goal of long - term economic development. south africa ’ s monetary policy framework is not one of rigid inflation targeting, but a flexible one, which takes full account of the outlook for real economic growth and how it is likely to affect inflation over the forecasting period. for instance, when demand is weak and exerts downward pressure on prices, the sarb has far more latitude to ‘ see through ’ external price shocks than in an environment of domestic ‘ overheating ’. however, as i mentioned earlier, trying to ‘ kick - start ’ economic growth and employment through a larger dose of monetary stimulus would probably have only a short - lived impact on activity. by contrast, its implications for the current account, policy uncertainty and inflation expectations would most likely be negative. over time, therefore, the consequence would probably be higher, rather than lower, interest rates. international and local experience does suggest that it is a stability - oriented monetary policy framework, focused on reducing price volatility and risk premiums on financial assets, that has the best chances of delivering lower interest rates and stronger economic growth, amid sustainable investment

. the slr is currently the binding capital requirement for some dealers, and it has significantly increased the amount of capital that needs to be held against low - risk assets. this has resulted in significant adjustments in the composition of dealer balance sheets. for example, the imposition of the slr has been cited as an important factor in the shrinkage of dealer repo financing activity. in contrast, the risk - based capital standards and new liquidity standards are unlikely to be important for treasuries and repo backed by treasuries because treasuries are treated as posing less risk to the banks that hold them and count as high - quality liquid assets. for the corporate bond market, the most relevant factors are probably the increase in the basel risk - weighted capital ratio, the comprehensive capital analysis and review ( ccar ) stress tests – which subject the dealer trading book to additional global market shocks that include a sudden increase in general risk premiums and credit risk combined with significant market illiquidity – and the volcker rule, which prohibits proprietary trading for a number of asset classes including corporate bonds, but not u. s. treasuries. however, for both markets, other non - regulatory factors are also important. liquidity provision is affected by changes in market structure, how trades are executed and by competition from outside of the regulatory boundaries that have been established for systemically important financial institutions. the market structure for many asset classes has evolved from a bilateral otc structure toward a more open, centralized structure through the adoption of electronic trading platforms, post - trade infrastructures and higher degrees of transparency. for example, in the u. s. treasury market, firms specializing in high - frequency bis central bankers ’ speeches algorithmic trading have become much more important and now make up more than half the trading in the electronic, interdealer cash market. this change in market structure has reduced the cost of trading in the interdealer market, especially for small trade sizes. electronic trading enables the use of automated trading strategies which tend to employ speed for executing small - size trades, and the liquidity on electronic trading platforms allows traders to get in and out of positions quickly. the growth in high - frequency trading likely accounts for the reduction in trade size discussed earlier rather than this reduction being indicative of less liquidity. the movement toward electronic trading has allowed a more diverse set of actors to participate in the market, thereby increasing competition and likely leading to improved market liquidity