Overall, the desire to rebuild wealth through savings and the limits on credit availability to households has acted to restrain consumer spending, keeping the recovery tepid. To some degree, this adjustment is unavoidable, as the economy had reached unsustainable levels of consumption and housing demand. However, the fact that many of these adjustments are inevitable does not rule out a role for monetary policy to support economic activity. Very low interest rates can help smooth the adjustment process by supporting asset valuations, including making housing more affordable and by allowing some borrowers to reduce debt interest payments. Beyond this direct role in smoothing the deleveraging process – to the extent that monetary policy can “cut off the tail” of the distribution of potential adverse economic outcomes, making a truly disastrous outcome less likely – it can help encourage those households and businesses with money to spend to do so. Today’s low and falling rate of inflation – at a time when interest rates are near zero – is a problem that is slowing the adjustment process. Currently, by most measures, inflation is below the level that members of the Federal Open Market Committee (FOMC) view as consistent with price stability. Although the Federal Reserve has no formal numerical inflation target, it is noteworthy that the long-run inflation forecasts of the FOMC members cluster around 1.75 percent to 2 percent for the personal consumption expenditures (PCE) deflator.

ISRA focuses on applied research in Shariah and Islamic finance, and provides the avenue for greater engagement between industry players and scholars. In addition, the tax neutrality treatment, has paved the way for the introduction of innovative products such as Ijarah Munthahiah Bithamleek (leasing ending with ownership) and Musharakah Mutanaqisah (diminishing partnership) in home financing, and currency option using the concept of Hamish Jiddiyah (security deposit) and Tawarruq (monetisation). Secondly , foreign Islamic subsidiaries have an important role in enhancing the international linkages of the Islamic finance industry regionally and internationally. Reinforced by a well developed legal, regulatory and Shariah framework and with three decades of experience, our Islamic financial system offers a unique platform as a meeting place between those that require funds and those with surplus funds. Malaysia has the full complement of the financial infrastructure, products and institutions. This is reinforced by the adoption of international regulatory best practices and liberal foreign exchange administration rules. This environment has encouraged the issuance of ringgit denominated sukuk by multilateral institutions and foreign multinational corporations in our market. It has also increased participation of investors in our Islamic financial markets. In a number of the sukuk issuances, the foreign subscribers (other than from Asian region) represent more than two thirds of total  2  BIS Review 146/2008  subscribers. Given the investment opportunities in the East Asian region, there are significant potential business activities, especially in the Asia-Pacific region.