currencies of other commodity producers have also been affected, in some cases more so than the rand. since the beginning of the year, for example, during which time the rand has depreciated by about 9 per cent against the dollar, the rand remains more or less unchanged against the australian dollar and the russian ruble, but has appreciated by about 8 per cent against the new zealand dollar, by about 17 per cent against the brazilian real, by about 2 per cent against the chilean peso, and by about 3 per cent against the canadian dollar ( although there was generally a good deal of volatility between these two periods ). monetary policy reactions have differed ; over this period, monetary policy has been tightened in brazil, unchanged in chile, and loosened in australia, canada, and new zealand. the question is how monetary policy should react to different categories of shocks. textbooks distinguish between portfolio shocks and terms - of - trade shocks ( apart from standard domesticdemand shocks ). the challenges posed to the rand by the us policy uncertainty clearly fall into the category of portfolio shocks. here, literature tells us that policymakers should respond to these shocks by tightening monetary policy. in an inflation - targeting framework, the tightening would depend on the extent to which the weaker exchange rate was expected to impact on inflation rather than acting to protect the exchange rate per se. the role of inflation expectations ( and monetary policy credibility ) would be central to this. reaction to a terms - of - trade shock is less straightforward, as it would also depend on whether it was a decline in an export price ( for example the gold or platinum price ), which would in itself have less impact on domestic prices, or whether it was an increase in import prices ( for example oil prices ), which do impact more on domestic inflation. in general, a terms - of - trade deterioration driven by a decline in export prices implies a decline in domestic incomes which can be disinflationary. a fall in export prices may be accompanied by currency depreciation which moderates the impact of the decline in export prices on demand and inflation. a policy response would need to try and ‘ see through ’ the first - round effects of the change in the exchange rate. however, again, much depends on the extent to which inflation expectations are well anchored. where countries have inflation under control, a response to depreciation and negative termsof - trade shocks can be more supportive to economic activity. other commodity producers –

the repeated downward revisions to our estimates of potential growth. this last problem requires structural reforms rather than a monetary policy response. our most recent estimates show potential growth remaining under 2 per cent into 2018 ; this is well below the rate needed for meaningful per capita increases in income and faster job creation. lately, there has been speculation about the end of the hiking cycle possibly having been reached. while the recent improvements to the inflation outlook are a positive development, the risks in the policy environment remain too numerous to be able to say definitively that the hiking cycle is over. we will continue to be guided by the evolving data and our collective understanding as the mpc of what any new data and information suggests for the inflation trajectory. monetary policy and long - term growth this brings me to my second question, about the role of monetary policy in fostering longterm economic growth. it is now widely accepted that the appropriate role of monetary policy is in focusing on price stability in the medium to long run. it can also assist in smoothing short - term growth fluctuations provided that this does not compromise price stability. monetary policy helps to provide a stable, growth - friendly environment but it is most effective if the broader environment is similarly geared towards encouraging investment and unlocking growth potential. in south africa, we have made progress with alleviating infrastructure constraints over the past few years but now – as in the majority of emerging markets – we urgently require structural reforms. without reforms, growth will not accelerate significantly – irrespective of the appropriateness of monetary policy settings. structural reforms required refer to, for example, policies aimed at increasing competition in product and labour markets. many south african sectors are highly concentrated and the barriers to entry for small or new firms are high in an environment dominated by a few longestablished firms. small firms tend to be relatively more labour intensive than large firms, so if the barriers to entry were lowered and more small firms entered the sectors, employment would rise – and it would likely rise faster if this shift were accompanied by labour market reforms. both these policies would not only improve the competitiveness of the economy but also make it more inclusive, providing opportunity for the unemployed, existing small firms and potential entrepreneurs, many of whom are currently locked out of the formal economy. the international monetary fund ’ s recent article iv assessment of south africa reiterates the need for these reforms, which have also been recommended by the world bank and the oecd 5. fortunately, south africa has a long