This has included wide ranging liberalization measures including bringing in new Islamic finance foreign players into our system through the issue of new licences and allowing for greater levels of foreign interest in our domestic financial institutions. The liberalisation has also involved the potential for greater foreign participation in our domestic financial markets. In 2002, Malaysia achieved a further significant milestone when the Malaysian government issued the first global sovereign sukuk, raising USD600 million. With this issuance, it became an international benchmark for the issuance of global sukuk. The sukuk issue was listed on the Luxembourg Stock Exchange, Labuan International Financial Stock Exchange and Bahrain Stock Exchange. There has since been further sovereign issues in the global capital market. In 2006, the Malaysian market saw the launch of a sukuk using concepts such as Mudha-rabah, Mu-sya-rakah and Ijarah. The issuers included Malaysia's government-linked companies. A landmark example was the USD750 million exchangeable sukuk Musyarakah by Khazanah, the government's investment corporation for the purpose of selling a stake in Telekom Malaysia . It marked the world's first issue of its kind, incorporating full convertibility features common to conventional equity-linked transactions. Following these developments, the Malaysian sukuk market has attracted a wide range of lead arrangers. In addition, the rising demand and the growing number of issuers and the broadening investor base has led to the growing sophistication of the market. By January 2007, Malaysia accounted for 67 per cent, about two-thirds of the global sukuk outstanding, amounting to about USD47 billion.

The effects of this angst are already showing up in the investment numbers. An additional fly in the ointment, if you will, is the recently released downward revision for GDP growth covering last year and an announced estimate of a sizable downward revision to payroll employment. One implication of these revisions is that the economy’s underlying momentum was already somewhat less robust than previously thought, even before recent developments pointed to a less rosy outlook. The Path Forward So what will the response from the Fed be to all of these developments? Our role is to navigate a complex and at times ambiguous outlook to keep the economy growing and strong. As events unfold and conditions evolve, it’s critical we understand which developments are mere bumps in the road and those that will affect the outlook in a material way over the longer term. That means maintaining a data-dependent approach that takes into account the risks and uncertainty that are weighing on the economy. I will continue to consult everything from very granular data about individuals’ experiences of employment conditions, through to the macro projections for global growth. We need to consider all of the information available and be flexible in our response. Conclusion Low inflation is indeed the problem of this era. The current outlook of moderate growth, low unemployment, but stubbornly low inflation is a reflection of the broader economic picture—the July rate adjustment an appropriate response to ease financial conditions and support the economy.