the transmission of monetary policy to the real economy in a low interest rate environment and in changing economic circumstances. a second challenge relates to the potential side effects of our instruments. let me briefly illustrate these challenges without offering any definitive answers. state - and time - contingent monetary policy transmission a variety of factors influence the extent to which changes in financial conditions affect aggregate demand. it depends, amongst other things, on the slope of the is curve – the curve that balances investments and savings. this slope may be different when interest rates are low, or when they have been low for a protracted period of time. https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201104 _ 2 ~ 9afd2bf0ad. en. html 3 / 7 04 / 11 / 2020 monetary policy in changing conditions although the response of investment and consumption expenditure to changes in interest rates is at the heart of stabilisation policies, this question has received surprisingly little attention in the literature so far. academics and central bankers alike have focused on the slope of the philips curve rather than the slope of the is curve. a few studies suggest that monetary policy transmission may be non - linear in the level of the interest rate. [ 4 ] this could affect the extent to which we can bring future activity into the present : researchers have dubbed this the “ macroeconomic reversal rate ”. before the pandemic, for example, we observed stagnation in households ’ intentions to frontload major purchases ( see left chart slide 8 ). the household gross savings rate has increased rather than fallen. evidence is too scant to draw definitive conclusions at this stage. higher savings may also reflect the offsetting effects of structural factors. [ 6 ] an ageing society, for example, may see its savings rate increase despite low real interest rates. what is more certain, however, is that the pandemic has reinforced the trend towards higher savings ( see left chart slide 8 ). much of these savings have been forced, although a considerable part represents precautionary savings. these developments highlight that the strength of monetary policy transmission may depend not only on the interest rate level but also on the state of the economy. this is a particularly important aspect at the current juncture. significant and prevailing uncertainty about income prospects may weaken the willingness and ability of firms and households to take full advantage of loose financial conditions. recent surveys indicate that households continue

, 2 per cent and is notably lower than the pre - crisis growth rates. in recent years the lower growth rates was attributable to significant supply side constraints and disruptions. the most recent electricity load shedding has become a more pronounced drag on real output and unfortunately is likely to be a binding constraint over the short to medium term. south africa ’ s current account deficit has improved slightly from 5, 8 per cent of gdp in 2013 to 5, 4 per cent in 2014. although this is often described as a vulnerability, it is somewhat mitigated by the fact that the public debt to gdp ratio is manageable at approximately 45 per cent, a fairly small percentage of the public debt is foreign denominated and lastly, the country ’ s net international investment position, ( i. e. external financial assets minus liabilities ) stood at only – r438 billion in the final quarter of 2014. bis central bankers ’ speeches the south african government released the national development plan some two years ago. this plan offers a long - term perspective on how to eliminate poverty and reduce inequality by 2030 by, inter alia, growing an inclusive economy, building capabilities, and enhancing the capacity of the state. should significant aspects of this plan be successfully implemented over the next decade or so, it will contribute positively towards lifting the potential growth rate of the economy and causing unemployment and poverty levels to drop in a meaningful way. the slow growth rate referred to above, however, has not only been impacted by domestic idiosyncratic factors only. certain exogenous factors, such as the moderation in emerging market economies growth rates, weaker external demand and lower commodity prices have certainly contributed to the more pedestrian growth outcomes. the unprecedented extent of unconventional monetary policy adopted by the advanced economies and the subsequent commencement by the us on the path towards monetary policy normalisation has led to significant spill - over effects. this is as a result of the extent of global trade and the integration of financial markets and has contributed to the high levels of volatility seen in the foreign exchange markets. the rand / dollar exchange rate has depreciated by 4, 96 per cent since the beginning of this year, but has appreciated by 7, 25 per cent against the euro and hence, on a trade weighted basis the rand had been relatively stable. the volatility in the foreign currency exchange markets is likely to persist and will be amplified should the timing of the so - called lift - off differ from market expectations