The previous MPR was published in October 2012 at a time of significant economic turmoil and heightened uncertainty about future economic developments. Given very low interest rates, the United States Federal Reserve (the Fed), the European Central Bank (ECB) and the Bank of Japan (BOJ) stepped up their use of unconventional monetary policy measures to address deteriorating conditions and financial market tensions. Growth in the fourth quarter of 2012 was widely expected to disappoint in most advanced economies and did, with the euro area remaining in recession and momentum falling in systemically important emerging-market economies. Consequences of this decelerating growth and recession have been a further moderation in price pressures and a subdued outlook for global inflation.An interim fiscal cliff arrangement in the United States (US) and subsiding sovereign debt risks in Europe contributed to some improvement in global financial market sentiment as 2012 ended and 2013 began. A sluggish start in 2013 gradually gained momentum, with some key economies growing faster than expected and financial markets strengthening. A nascent recovery in the US solidified as private demand slowly strengthened, job creation picked up, and credit and housing markets healed. Yet events in the euro area (particularly Cyprus) and the unresolved fiscal gridlock in the US continue to sap confidence and undermine growth prospects.The June 2013 MPR marks a point of considerable improvement in financial conditions and somewhat better economic outcomes in some countries, but in a global environment of sustained uncertainty and continued economic fragility. The better outcomes early in the year had only marginal effects on global growth forecasts for 2013. The sizeable mismatch between financial market and real economy outcomes has raised new concerns about the efficacy of support to global liquidity.Some of the improvement in global conditions filtered through to South Africa early in the year but export demand and commodity prices remained weak. In subsequent months a range of prominent domestic factors have deteriorated, negatively impacting on the local economic landscape. Widespread labour market instability has undermined confidence, investment and output. Weak export demand, lower terms of trade and sustained domestic spending have further led to a widening current-account deficit on the balance of payments, and contributed to credit ratings downgrades. These domestic economic developments became the dominant drivers of the depreciating trend in the exchange value of the rand, in turn helping to support domestic inflation running against the global trend.