I had then also warned that the “three bears”—inflation, protectionism, and financial instability—could make an appearance any time to spoil the party.1 Six months later, we can say that at least two of the three bears have been sighted—inflation and protectionism. First, the risk of more rapid inflation has heightened. Inflation is on an upward path globally, and in the US has reached the Fed’s 2% target amidst a tightening labour market. Accordingly, last month, the Fed indicated a faster pace of monetary policy normalisation. The expectation now is for two more rate hikes this year. But if inflation surprises on the upside, the Fed could be compelled to hike more. This would tighten global financial conditions by more than currently anticipated. Tighter global financial conditions could trigger market volatility and dampen corporate spending. As interest rates rise, some firms could face debt-servicing problems, especially in emerging market economies with relatively high levels of leverage. And besides the risk of faster rate hikes, two things are happening that threaten to tighten global financial conditions even more: first, the unwinding of the Fed’s balance sheet which withdraws $ liquidity from global markets; and second, the increased issuance of US Treasury bills to fund fiscal expansion, which accentuates tightness in $ funding. We are already seeing some capital outflows from emerging market economies, alongside some tightness in $ liquidity and funding markets. This is to be expected. But if the withdrawal of $ liquidity becomes more acute, some emerging market economies could face serious bouts of financial volatility.

PCPs are also in the works for two more areas in banking – wealth management (which is rapidly growing) and operations and support (which is undergoing disruptive change). IBF will launch a dedicated career centre next month, to offer integrated support across career planning, skills development, and job placement. 8 / 11  BIS central bankers' speeches  While the financial industry continues to create jobs on a net basis, there is a lot of churn and movement in the industry. Skills development, career pathways, and job placements need to be looked at holistically. IBF will leverage on its strong network with financial institutions to help professionals navigate and make their career transitions. IBF will also work closely with partner agencies – e2i, NTUC and WSG – to support financial sector professionals looking to move into other sectors. INNOVATION AND TECHNOLOGY The third pillar of the ITM is innovation and technology. Singapore has global mindshare today as one of the leading Fintech hubs in the world. Our FinTech agenda is well known and there will be other occasions to talk about the various initiatives. Today, I want to emphasise the central role played by regulation in promoting innovation and technology. To get innovation right, we must get regulation right. This is a creative tension – managing risk while facilitating innovation. It calls for a pragmatic and flexible approach; there is no one-size-fits-all approach. Sometimes, it means not rushing to regulate so that we do not front-run innovation e.g.