The inflation rate as measured by the more familiar Retail Prices Index has fallen even more sharply, reflecting the reduction in mortgage interest payments associated with the reduction in Bank Rate and falling house prices. When the recovery does come, as it surely will, the margin of spare capacity in the economy will begin to shrink and inflationary pressures will start to build again. So at some stage, we will have to begin withdrawing the large monetary stimulus. Although this may be some way in the future, some market participants and commentators are already starting to worry about whether we will be willing and able to accomplish this sufficiently rapidly to prevent inflation taking off, particularly given the scale of the Government’s prospective financing needs. Three points are worth making. First, the timing of the withdrawal of the monetary stimulus will be governed by the need to meet the MPC’s inflation objective, not by the Government’s financing needs. Second, with Bank Rate at its effective floor, we presently have only the asset purchase programme as a tool to stimulate demand. But when it comes to tightening policy, we have two instruments at our disposal: asset sales; and raising Bank Rate. It is not necessary to unwind the asset purchases before raising Bank Rate. Third, if we felt the need to drain the extra reserves from the system rapidly, we could also do it by exchanging the reserves for short-term Bank of England bills, allowing us to stagger the sales of the gilts.

Industri kewangan Islam di Malaysia telah muncul sebagai satu komponen sistem kewangan yang berdaya maju dan berdaya saing, seiring dengan sistem kewangan konvensional dalam menyumbang kepada pembangunan dan pertumbuhan ekonomi negara. Kini kita telah memiliki lanskap kewangan Islam yang komprehensif, dan kejayaan kita dalam mengintegrasikannya telah menyumbang kepada proses pengantaraan kewangan domestik yang lebih progresif. Sehingga kini, perbankan Islam telah berjaya menjana aset sekitar RM90 bilion atau 10 peratus daripada juzuk pasaran. Industri takaful pula telah mencatat aset sejumlah hampir RM5.0 bilion. To further strengthen the Islamic financial system and sustain its growth, it is vital to enhance the effectiveness and efficiency of the Islamic financial institutions in meeting the changing requirements of our economy. The Islamic financial infrastructure needs to be continually enhanced to meet the new, more complex and differentiated demands of the various economic activities of the respective sectors of our economy. Of importance is the need to provide a mechanism to ensure accessibility to information by the public on Islamic financial services and products. An extensive and structured education programme is thus key to enhance consumer and business awareness and knowledge on the products and services. It also represents part of the efforts to promote market integrity over the activities in the market. Of equal importance is also the need to strengthen the consumer protection infrastructure in Islamic finance. Effective dissemination of information will provide consumers and businesses with the necessary information to undertake the financial transactions with awareness of their rights and accountabilities.