Inflation and Supply-Chain Challenges One of the foremost concerns surrounding the outlook is inflation, which rose considerably last year. There are two main contributors to the current high inflation: very strong demand, especially for goods, and supply bottlenecks. Both have been prevalent throughout the pandemic. The shutdown of factories—particularly those in Asia—and widespread lockdowns led to disruptions to logistics networks, elevated shipping costs, and prolonged delivery times. A new index created by New York Fed research staff shows that global supply-chain pressures shot up last year, reaching historically high levels.1 These challenges are not just top of mind for companies selling their goods or consumers waiting for their purchases to be delivered. Elevated prices have real life consequences for so many, particularly for people who are struggling to cover the rising costs of food, housing, and transportation. The circumstances we are facing today are unlike anything we’ve experienced in the past. 2/3  BIS central bankers' speeches  Typical historical episodes cannot be used as reference points for current conditions. As an example, the very large increases in prices that we see today are primarily for durable goods. This is a striking turnaround from the past 25 years when those prices had been trending lower. In contrast, even with the recent increases, prices on services and non-durable goods are now fairly close to their longer-run trends. And, even though the Omicron wave is posing new obstacles, some supply issues are starting to work themselves out as the economy adjusts to the changing circumstances.

A number of the proposals being considered are international in nature, like those improving supervisory cooperation between regulators, and requiring higher loss absorbency capacity for G-SIFIs. However, primary responsibility for these G-SIFIs lies with national regulators, who must retain discretion over the specific supervisory stance to take with respect to these institutions. Conclusion 25. Let me conclude. This is a fertile time for the study of finance and risk. The financial landscape is undergoing dramatic change. The three dimensions of rebalancing that I outlined are still being played out, with many unanswered questions. What should be the balance between markets and regulation? What is the optimal level of capital in the banking system? How can we minimise the risk of liquidity shortfalls? Should trading activities be separated from commercial banking? How should incentives be structured to promote sound risk management? Can financial innovation help to reduce financial risks? What do we do with financial institutions that are both too big to fail and too big to save? How should macroprudential policies be designed? 26. The Sim Kee Boon Institute can play a key role in advancing our understanding of these issues and providing thought leadership. The Institute has already published a number of interesting papers on topics ranging from securitisation to the effects of poison pills on corporate governance. I look forward to more insights from the Institute in the years ahead. We can expect nothing less from an Institute named after one of the pioneers of the Singapore Civil Service.