##isation becomes unavoidable, and the less likely it is that the federal reserve would delay policy action because of, say, more elevated volatility in the us treasury market. nevertheless, the federal reserve has equally made it clear that considerable uncertainty surrounds its baseline economic outlook, and that it remained watchful of potential developments that may hinder the us economic recovery. in testimony to the joint economic committee of the us congress on 7 may 2014, federal reserve chair janet yellen referred to some specific risks, indicating in particular that “ one prominent risk is that adverse developments abroad, such as heightened geopolitical tensions or an intensification of financial stresses in emerging market economies, could undermine confidence in the global economic recovery. ” therefore, the pessimists among market participants may err in fearing that us policy normalization will proceed irrespective of global developments, and in particular, of its effect on financial conditions in both the major developed and emerging economies. at the same time, the global economic recovery remains highly uneven, and this has translated into a growing policy divergence between the major central banks. in particular, the eurozone has in recent quarters experienced a renewed loss of economic momentum and a drift in inflation rates towards very low levels, which have prompted the european central bank to provide additional accommodation, first in the form of targeted long - term repo operations, and then via the announcement of a programme to acquire asset - backed securities and covered bonds on the central bank ’ s balance - sheet. the mix of lower eurozone inflation and expectations of additional central bank liquidity appear to have been key in driving eurozone government bond yields lower this year ; and in turn, this may be another reason why yields on major emerging bond markets, like south africa, have also trended lower. provided, as the market consensus expects, that there is no quick reversal of current inflation and policy trends in the eurozone, developments in that region may continue to dampen, in the future, the impact of us policy normalisation on flows into, and prices of, sa financial assets. whatever the outcome and wherever we may find ourselves next year this time, i believe a lot of progress has been made by policy makers around the world, and particularly within the g20, where there is greater cooperation and greater awareness and efforts made towards understanding the impacts of policy actions across countries, in particular the spill overs and feedback loops and therefore how this might influence not only individual countries but also the global

rand, however, this upside risk to inflation could be mitigated by the very consequences of slow growth in some of the world ’ s major regions, mainly the pursuit of stimulative monetary policies. these conflicting challenges, and the uncertainties that surround them, call for particular vigilance on behalf of monetary policy - makers, and for a readiness to adapt one ’ s monetary stance to a changing macroeconomic environment. at present, the monetary policy committee remains of the view that interest rates will have to normalise over time. while the balance is delicately poised with regard to the timing of any policy adjustments, and requires careful judgement to avoid pre - mature action in the wake of an already weak economic growth environment, it is similarly important that the bank, in following a forward - looking approach to monetary management, does not allow any doubting of its preparedness to act when necessary and in keeping with the commitment to its primary objective. thank you. bis central bankers ’ speeches