in the range of 0. 8 - 0. 9 percent, as the demand of banks and other institutional investors for the bonds has become even stronger. yield spreads between private bonds ( bank bonds and corporate bonds ) and government bonds remain virtually unchanged. stock prices continue to be weak, reflecting the uncertainty about the domestic economic outlook. the nikkei 225 stock average is recently moving at around 8, 500 yen. in the foreign exchange market, the yen has been strengthening somewhat, reflecting the weakening of the u. s. dollar on the whole mainly caused by the strained situation in the middle east. the yen is currently traded in the range of 117 - 119 yen to the u. s. dollar. with regard to corporate finance, private banks are becoming more cautious in extending loans to firms with high credit risks while they continue to be more active in extending loans to blue - chip companies. the lending attitudes of financial institutions as perceived by firms, particularly small ones, continue to be severe. in the corporate bond and cp markets, the issuing environment for firms with high credit ratings is accommodative, but the environment for firms with low credit ratings is severe. credit demand in the private sector continues to follow a downtrend mainly because business fixed investment remains sluggish while firms are continuously reducing their debts. amid these developments, private banks ’ lending continues to decline by about 2 - 3 percent on a yearon - year basis. the amount outstanding of corporate bonds and cp issued is moving at around the previous year ’ s level. meanwhile, according to business surveys, the financial position of firms, particularly that of small firms, remains severe. the monetary base exhibits a high year - on - year growth rate of around 20 percent. the year - on - year growth rate of the money stock dropped to around 2. 0 - 2. 5 percent in december. funding costs for firms continue to be at extremely low levels on the whole. against the above background, the financial developments are summarized as follows. money market conditions as a whole continue to be extremely easy. long - term interest rates are declining. the money stock and the monetary base maintain high growth rates relative to that of economic activity as a whole. however, stock prices remain unstable. in corporate finance, the fund - raising environment of firms with low credit risks is accommodative on the whole, but with regard to firms with high credit risks, the stance of investors is severe and the lending attitudes of private banks are becoming more

/ publications / workingpapers / 2020 / 10421 / wp % 202012. pdf roy havemann and hylton hollander. “ fiscal policy in times of fiscal stress ” wider working paper. no. 52 / 2022. available at : https : / / www. wider. unu. edu / publication / fiscal - policy - times - fiscal - stress fiscal consolidation would also have important implications for our longer - run ability to protect the value of the rand, which is a central concern for us as the sarb. one of the papers discussed at jackson hole this year was about the relationship between fiscal and monetary policy, and it offered the following warning : when fiscal imbalances are large and fiscal credibility wanes, it may become increasingly harder for the monetary authority to stabilise inflation around its desired target. if the monetary authority increases rates in response to high inflation, the economy enters a recession, which increases the debt - to - gdp ratio. if the monetary tightening is not supported by the expectation of appropriate fiscal adjustments, the deterioration of fiscal imbalances leads to even higher inflationary pressure. as a result, a vicious circle of rising nominal interest rates, rising inflation, economic stagnation, and increasing debt would arise. 23 a central bank can do a great deal for price stability. it can nurture a reputation for controlling inflation. it can also accumulate foreign exchange reserves, to help protect the solvency of the country. 24 but central banks are not immune to fiscal outcomes. if we are to maintain moderate levels of inflation in south africa, we will need a macro strategy that delivers fiscal sustainability. there have been some signs of progress lately, but we are still running fiscal deficits near 6 % of gdp, despite record commodity prices. we have seen before, and we know high commodity prices do not last forever. at some stage, the commodity prices will correct, and we had better be prepared for it. for monetary policy, our immediate priority is to guide inflation back towards the middle of our target range. our larger strategic goal, however, is to undo the error of francesco bianchi and leonardo melosi. “ inflation as a fiscal limit ” 19 august 2022. available at : https : / / www. kansascityfed. org / jackson % 20hole / documents / 9037 / jh _ paper _ bianchi. pdf agustin samano. “ international reserves and central bank independence. ” policy research working paper.