exclusively on consumer price inflation and not concern itself with asset prices and financial imbalances more generally. a proliferation of objectives is a recipe for confusion. moreover, how can the authorities distinguish an unsustainable from a sustainable evolution in asset prices? even if they felt confident that a particular development was unsustainable, how could they muster the political support to resist it, especially if in so doing they were to induce an economic slowdown? finally, how could one recognise such a development sufficiently in advance to deflate it without damaging consequences that would inevitably be blamed on the central bank? nevertheless, it seems a counsel of despair to say that nothing can be done. the costs of uncontrolled financial cycles are sufficiently large that avenues for resisting them should at least be explored. at a minimum, it seems reasonable to suggest that, in formulating monetary policy aimed at an inflation objective, central banks should take explicit account of the impact of financial developments on the balance of risks. when credit expansion is rapid and asset prices are growing substantially faster than the price of current output, it might be appropriate for the authorities to aim for price increases in the lower part of the target corridor, or else to aim at a slowing in the overall rate of credit expansion. in particular, rapid credit growth should prompt the central bank to look extra hard for inflation risks. such a policy, undertaken when the inflation threat seems remote, would no doubt be characterised as excessively cautious. yet it should be remembered that the costs of financial crises have in the event turned out to be much greater than the output forgone in the short term by restraining unsustainable growth. conclusion let me end by recapitulating the main points of my argument. many institutional actors are involved in the quest for financial and monetary stability. they share a common goal, but they approach it from different perspectives. i hope i have persuaded you that the interrelationship between these perspectives is broader and deeper than is usually thought. monetary policy and prudential supervision interact in ways that increasingly demand a unified, and mutually reinforcing framework. much progress has been made in developing such a framework in recent years. nevertheless, much remains to be done. the preservation of stability in the financial system requires an understanding of how macroeconomic developments interact with institutional behaviour and prudential norms to support or undermine equilibrating tendencies. and the implementation of monetary policy requires an understanding of the fact that the consequences of monetary policy for

provided. ladies and gentlemen, the introduction of islamic banking would come with its own challenges. for us at bank of zambia, this entails further strengthening of our supervisory capacity. we would welcome this challenge and hope to rise to the occasion by providing adequate supervisory infrastructure and a sound environment in which economic agents can conduct their businesses. i have no doubt that this workshop is very timely and that it provides a unique opportunity for participants to share knowledge and experiences on how best to promote financial diversity and inclusiveness especially with regard to islamic commerce and finance. distinguished participants, on behalf of bank of zambia, i would like to thank the organizers and presenters of this workshop for recognizing the important role that islamic commerce and finance plays in an economy like ours. it is my hope that all delegates will engage fully in these discussions and make the most of the wealth of knowledge generated in the house. ladies and gentlemen, it is now my honour and privilege to declare the islamic commerce and finance workshop officially open. thank you. bis central bankers ’ speeches