volatility, both in the run - up to the referendum and indeed right up to this point in time. the uk voted to leave the eu by 52 per cent, with a voter turnout of approximately 72 per cent, in what was an unexpected result for many. on the day of the announcement, the chicago board ’ s measure of market volatility ( known as the vix ) jumped by 49 per cent from the previous day, the fear of the unknown aptly accounting for the spike in volatility. the uk ’ s present and future are now riddled with uncertainty, naturally accompanied by a flight to safety. as risk aversion soared, safe - haven assets were in high demand, and as such the price of gold breached the us $ 1300 mark for the first time since january 2015 while the us 10 - year treasury yield fell 19 basis points and the german 10 - year bond yield www. thefinancialphilosopher. com. bis central bankers ’ speeches fell to a record low of – 0, 05 per cent. the relative safety of the japanese yen saw the currency gain 11 per cent against the sterling, which in turn fell to a 30 - year low the following day against the dollar. the market reaction was significant, described by some market participants as ‘ panic buying and selling ’, given the widespread expectations that the british would vote in favour of remaining within the eu. as markets slowly digested the news, however, some of these market movements were pared back, with no sustained market disruptions being reported. the decline in bond yields and demand for safe - haven assets also points to fears of the potential impact that the brexit may have on an already weak and fragile global economy. some of the main concerns relate to the potential ripple effects on the rest of europe and global trade flows. the consequences of this vote will only become clear over time, and it is anticipated that it will take about two years for the uk to finalise arrangements to leave the eu, during which period various decisions and negotiations on the way forward will take place, raising the possibility of yet another prolonged period of global volatility. in the meantime, market fears are being fuelled by concerns of contagion in the eu, the probability of scotland and perhaps also northern ireland leaving the uk as well, and the uncertainty surrounding trade agreements that would follow from the negotiations. for south africa, the implications through direct trade links are expected to be relatively minimal.

to different sources of inflation. it is well known, by central bankers and academics alike, that monetary policy works best when managing demand - side inflation pressures. for instance, higher interest rates can cool off an overheating economy, aligning demand for goods and services with supply. however, we rarely find ourselves in this position in south africa. apart from the boom of the late 2000s, and arguably the period around the 2013 taper tantrum, the inflation - targeting era has not featured many episodes of overheating. instead, we often have to think about managing sticky inflation as we confront multiple supply - side shocks in the context of subdued economic growth or slack in the economy. very few countries, to my knowledge, currently face pure demand - side inflation. but there are, across the world, variations among different economies that have different implications for their monetary policy response. i would distinguish two sets of countries. in the first category, inflationary pressures reflect both demand and supply factors. i would say that the united states ( us ) and the united kingdom ( uk ) currently fall in this category. in other words, one source of inflation is supply chain - related shortages, aggravated by increases in oil and food prices because of the russian war against ukraine. but, given the scale of monetary easing and significant fiscal stimulus in response to the covid - 19 pandemic, these economies have not only recovered from the pandemic but have seen page 2 of 8 demand - side pressures, particularly in the goods market, relative to services. demand - side pressures mean that monetary policy can play an important role in constraining demand, in interest rate - sensitive sectors, to bring inflation back to policy targets. in the second category, some countries are currently subject to supply - side shocks similar to those of the us and uk but with no significant demand - side pressures, other than a modest recovery from the pandemic. there is typically some evidence of higher inflation, frequently from a low base, but by and large there is still slack in the economy. this, i would argue, aptly describes a country like south africa as well as a few other emerging markets. in these circumstances, the textbook says you should try to look through the first - round effects of the supply shock and focus on the second - round effects. the fundamental question is whether the effects of the shock will be temporary or persistent. central banks should ignore temporary effects, but if they ignore persistent effects, that would be