cpi inflation is forecast to average 4, 7 per cent in 2011 and 5, 7 per cent in 2012, peaking at 5, 8 per cent in the first quarter of 2012. much of the increase in inflation is based on higher assumptions for international oil prices. the most recent survey shows that inflation expectations of financial analysts have deteriorated slightly, but expectations of business and trade unions have shown some improvements. the bureau for economic research inflation expectations survey shows that inflation is expected to average 5, 3 per cent in 2011 and 5, 7 per cent in 2012, compared to 5, 5 per cent and 6, 2 per cent in the previous survey. one of the key upside risks to the inflation outlook has been high real wage settlements. there are, nonetheless, indications of a moderation in wage settlements, with the overall wage settlement rate amounting to 8, 2 per cent in 2010, compared to 9, 3 per cent in 2009. nominal unit labour cost growth has similarly moderated, from 9, 3 per cent in the third quarter of 2010 to 7, 7 per cent in the fourth quarter. food and administered prices remain significant upside risks to the inflation outlook, most particularly, oil prices. it seems likely that oil prices will remain at elevated levels, even if current geo - political challenges can be resolved. the monetary policy committee has kept the repo rate steady at 5, 5 per cent since november 2010. while the risks to the inflation outlook are tilted to the upside, they are predominantly of a cost - push nature, but need to be monitored very closely for any second round effects. 6. conclusion in summary, the past year has brought some recovery in global economic activity, although the momentum has slowed somewhat. there are still many risks on the horizon, and south africa is subject to the same risks facing the global economy. the economic recovery in south africa is on track and short term economic indicators suggest that we will continue to see further improvements. however, growth continues to be at levels that are insufficient to meaningfully address unemployment. inflation has picked up, but is expected to remain within the target range over the forecast period. at the conclusion of its last meeting, the monetary policy committee deemed the bis central bankers ’ speeches policy rate to be at an appropriate level. however, inflationary pressures will be monitored, especially insofar as second round inflationary pressures may negatively impact the inflation outlook, so as determine when policy adjustments may be required. thank you. enjoy the rest of the conference.

daniel mminele : thoughts on south africa ’ s monetary policy address by mr daniel mminele, deputy governor of the south african reserve bank, at the jp morgan investor conference, washington dc, 16 april 2011. * 1. * * introduction good afternoon ladies and gentlemen. thank you to jp morgan emerging markets research group for inviting me to share with you some thoughts on south africa ’ s monetary policy. in the years prior to the most recent global financial crisis, central banks in general appeared to have almost perfected the conduct of monetary policy. 1 inflation targeting central banks were given operational independence to vary the short - term interest rate in order to achieve an inflation target. while this worked very well for some time, the global financial crisis showed us that achieving price stability by no means equated to achieving financial stability. this has resulted in somewhat of a paradigm shift for traditional monetary policy, and it seems we may be on the cusp of a new era in central banking. i would like to briefly discuss global economic developments and the changing role of central banks, highlighting the challenges and lessons learnt from the global financial crisis. i will then talk about south african monetary policy, as that is the reason for which i was invited to speak to you today. 2. global economic developments and monetary policy the international monetary fund ’ s ( imf ) latest world economic outlook ( weo ) reflects a similar picture to that of a few months ago. the global economic recovery proceeds at an uneven pace and although it is broadening, the divergence in economic activity remains wide. the growth momentum in advanced economies is gaining traction, but is insufficient to meaningfully impact on unemployment. emerging markets, on the other hand, are characterised by robust growth with signs of overheating in certain economies. the imf projects that global growth will moderate in 2011 to 4, 5 per cent from 5 per cent in 2010. advanced economies are forecast to expand by 2, 5 per cent and emerging economies by 6, 5 per cent. the imf has also identified a number of old and new risks, including the threat of spill overs from the euro area periphery to core europe, exacerbated by continuing weakness among many european financial institutions, a lack of clarity on exposures and weak sovereign balance sheets. this last point is not confined to europe, but a risk to advanced economies in general and the us and japan more particularly. it is plausible that this state of affairs, if not addressed, could result in