Second, there is the risk of inflation becoming entrenched due to a de-anchoring of inflation expectations. If inflation expectations become de-anchored, that would dramatically increase the persistence of the inflationary episode, potentially causing it to become selfsustained, and would require more radical actions by the central bank to quench it. So far, there is no clear evidence of de-anchoring of inflation expectations, although some indicators of medium-term inflation expectations stand slightly above 2 per cent, which needs closely monitoring. Most surveys of monetary analysts and professional forecasters see medium-term inflation at, or slightly above, 2%. This is also supported by inflation-linked swap rates adjusted for the presence of risk premia. By contrast, consumer expectation surveys offer a more worrisome picture, as the median of 3-year ahead inflation expectations has risen to 3%. As in the case of the risk of second-round effects, we should remain extremely vigilant about these developments. Third, there is a lot of uncertainty regarding future geopolitical events and their impact on business cycle dynamics. On the one hand, inflation may turn out to be higher than expected in a scenario in which the war in Ukraine is very protracted and the impact on energy markets is higher and more persistent. On the other hand, in this same scenario, if demand were to weaken further over the medium term due to lower real incomes, it would lower pressures on prices. Indeed, the ECB published in September an alternative “downside scenario”.

With the huge financing gap for infrastructure development standing at $ trillion in the decade to 2020, AIIB will be looking to play a major role in bridging the shortfall. Under the strong leadership of President Jin, AIIB would provide a global platform to coordinate efforts among existing international financial institutions and government authorities to bring development issues to light; it also has the capability to mobilise the liquidity and field expertise from investors, financiers and project developers from the private sectors to facilitate infrastructure development and their related financing activities. To the HKMA, President Jin has been a long-time friend. Just four months ago, we had the honour of President Jin as the officiating guest at the launch of IFFO and a key panel speaker at our inaugural conference. President Jin acknowledged that IFFO can be an important contributor to Asian infrastructure by helping to guide liquidity from private and institutional investors into productive investments, while also serving as a platform for communication, cooperation and knowledge exchange. Today we have the presence of 300 leaders from various sectors including finance, architecture, building and construction engineering, project management and consulting, project development and operation as well as professional services, many of you being the senior management of your leading organisations in the field. Indeed, Hong Kong possesses a critical mass of financial professionals which can support the operations of AIIB in areas such as project financing, bond issuance, investment, financial management and foreign exchange management.