Even if it does not provide guidance in all circumstances, I hope it can help explain why I voted for a 25bp hike – rather than something larger – last week. With that provocation, allow me to open up to questions. 14  All speeches are available online at www.bankofengland.co.uk/news/speeches  14  References Blanchard, O. and J. Galí (2007). ‘Real wage rigidities and the new Keynesian model,’ Journal of Money, Credit and Banking 39 (1), pp. 35–65. Blinder, A.S. (1998). Central banking in theory and practice, MIT Press. Brainard, W. (1967). ‘Uncertainty and the effectiveness of policy,’ American Economic Review 57(2), pp. 411-425. Carney, M. (2017). ‘Lambda,’ speech given at the London School of Economics, 16 January. Cunliffe, J. (2018). ‘A little bit of stodginess?’ speech given at Cumbria Chambers of Commerce, 13 July. Currie, D.A. (1985). ‘Macroeconomic policy design and control theory – A failed partnership?’ Economic Journal 95(378), pp. 285-306. Evans, C.L., J.D.M. Fisher, F. Gourio and S. Krane (2015). ‘Risk management for monetary policy near the zero lower bound,’ Brookings Papers on Economic Activity (Spring), pp. 141-196. Gerdesmeier, D. and B. Roffia (2004). ‘Taylor rules for the euro area: The issue of real time data,’ Bundesbank Discussion Paper 2004/37. Greenspan, A. (1994). ‘Risk and uncertainty in monetary policy,’ American Economic Review 94(2), pp. 3340. Haldane, A.G. (1995). Targeting inflation: A conference of central banks on the use of inflation targets, Bank of England. Issing, O. (2002). ‘Monetary policy in a world of uncertainty,’ Economie Internationale 92, pp. 165-179. King, M.A. (1999).

These developments were subsequently expanded with the introduction of Islamic windows by conventional banking institutions where Islamic products and services could be offered by these banking institutions. At the same time, adequate firewalls have been instituted to ensure absolute separation of banking operations to avoid co-mingling between the Islamic and conventional funds so as to ensure the integrity of the Islamic banking operations. 1/5  More recently, this structure has been strengthened. Conventional banking institutions that have achieved a critical mass in their Islamic finance operations have the option to transform their operations into a dedicated Islamic subsidiary. Within this framework, Islamic finance in Malaysia has proven to be resilient and able to function effectively and efficiently alongside the conventional financial system. The ability of the Islamic banking institutions to arrange and offer products with attractive and innovative features at competitive prices has appealed to both Muslim and non-Muslim customers, reflecting the competitiveness of Islamic finance as a form of financial intermediation. Since 2000, the domestic Islamic banking industry has been growing at an average of 18% per annum in terms of assets, while growth in the takaful industry was at an average of 28% per annum, with an increasingly more important role in supporting the growth and development process of the country. Attention has also been given to develop both the Malaysian Islamic money market and capital market. A wide range of instruments has been developed to facilitate the effective management of liquidity and funding by the Islamic financial institutions.