Similarly, Malaysia’s exports have been recording double digit growth since the start of 2021 and the order books of our exporters remain healthy. These positive developments will continue to provide support for growth in 2023. 4. Second, the labour market has also shown strength. Wages in both the manufacturing and services sectors have been increasing since the start of the year, at around 5% and 7%, respectively. Unemployment is now less than 4% and income prospects remain positive. 5. Third, in spite of global inflationary pressures, inflation remains well anchored. Headline inflation has averaged 3.1% year-to-date. It is largely supply-driven, but we have also seen stronger demand with the reopening of the economy. That said, we project that inflation will peak in the third quarter this year. In addition, the extent of upward pressures to inflation will remain partly contained by existing price controls and the prevailing spare capacity in the economy. 6. No doubt, the outlook next year will be more challenging due to a confluence of factors – rising geopolitical tensions and conflict, global inflationary pressures and extremely volatile financial markets. All these will lead to slower growth next year. And all this at a time just as when we thought that the pandemic was in the rear-view mirror. Ladies and gentlemen, 7. While acknowledging the challenging external environment, there is reason to be optimistic. Let me emphasise that the Malaysian economy is not in a crisis. The fundamentals of our economy and financial system are strong.

For instance, increases in reserve requirements affect only the banking sector, which may lead to disintermediation and increased cost of credit for those with limited access to other sources. In Chile many of these tools are under the control of the Superintendence of Banking and Financial Institutions (SBIF). This makes the Financial Stability Council I just mentioned a crucial instance for coordinating and implementing financial regulation with a systemic view. 3. Monetary policy in an environment of financial crisis  When using policy tools to prevent financial crisis is not enough and the financial system becomes unstable, standard monetary policy tools might be impaired. Many central banks target the overnight interbank rate, so the transmission of monetary policy relies on a working financial system and its effectiveness may be significantly weakened in conditions of financial distress. Furthermore, under extreme conditions, such as those experienced during the recent financial crisis, standard monetary policy may reach its natural limit that is the zerolower bound. Under these conditions, unconventional monetary policies may be the only ones at hand for a central bank. BIS central bankers’ speeches  3  The experience of the United States and Europe with unconventional tools during recent years is well known to all of you, so let me briefly describe our experience with them. It is important to mention that the scale of our interventions was substantially smaller, since we had to quickly undo many of our policy actions because of the fast recovery of the Chilean economy after the recession of 2009.