It should finally be noted that contrarian views are probably easier to arouse in a decisionmaking process that does not rest on a single unified analytical framework, such as one that would be used, for instance, to produce the central bank’s inflation projections. In this respect, the ECB’s monetary policy strategy, which aims to pass some robustness checks by making use of various theoretical and empirical approaches, may already provide the Governing Council with a relatively broad spectrum of views about risks to price stability. III. Conclusion  Let me now conclude. The financial crisis has exposed several shortcomings in the monetary policy frameworks of the pre-crisis era, and more generally in their intellectual foundations. Not only does maintenance of output and inflation stability not automatically deliver financial stability, but on the contrary, the very same monetary policy which successfully keeps output and inflation stable in the short run may well lead to the build-up of financial imbalances and asset price bubbles which threaten macroeconomic stability at longer horizons. Further, commitment to “mopping up” such bubbles by means of aggressive interest rate cuts implemented after their bursting has proved to be most unwise. Moreover, the recent experience demonstrated that such a strategy may well be unable to shield the economy from the costs deriving from the bursting of the bubble, costs which in many cases may simply be staggering. Also, the sheer size of the macroeconomic shock associated with the bursting of the bubble may be sufficient to plunge the economy to the zero lower bound.

In doing so, it will also contribute towards enriching further the diversity of players and strengthening the institutional infrastructure of the Malaysian Islamic banking system. The continued growth of Islamic finance in Malaysia The international economic and financial environment is expected to remain very challenging with several major economies now in recession and continued uncertainties prevailing in the international financial system. In spite of this, the Asian economies are still growing, albeit at a more modest pace. The dominance of domestic demand and increasing regional economic integration have enhanced the prospects for Asia to sustain a modest pace of growth. In this challenging international financial environment, it is encouraging that Islamic finance has continued to demonstrate its evolution and strong growth. Islamic finance has now become a new vehicle contributing to increasing the financial linkages not only within Asia but also with the rest of the world thereby facilitating cross-border allocation of capital globally. Indeed, a number of international financial centres have recognised Islamic finance as an integral part of their financial system in order to complete the suite of financial products and services being offered, and therefore are actively developing this segment. The Islamic finance industry has not only continued to grow but it has also been able to present a higher level of dynamism. The key indicators of the Islamic banking sector continue to record a progressive pace of development. The Islamic banking assets have expanded by 23% to RM234.9 billion compared with a year ago.