like slower normalization in the advanced economies, that push risk towards a stronger currency. indeed, conditions in the global economy have generally played a strong role in reducing downside risk to the rand in recent years. the inflation outlook and monetary policy the outlook for the exchange rate is an important, although not the only, consideration when making monetary policy decisions. the current environment has created challenges for monetary policy, but the positive news is that inflation has moderated and has been sitting fairly comfortably within the target range for the past few months. however, the expected inflation trajectory is still higher than we would prefer, with the risks tilted to the upside. at the same time, we have to take cognisance of the growth outlook and provide whatever support we can. this is exactly what we did at the monetary policy committee ( mpc ) meeting in july. however, we must be clear about the limits of monetary policy, and what it can and cannot do. we cannot expect monetary policy to solve what are essentially structural problems in the economy. page 4 of 9 year - on - year headline cpi 5 inflation returned to within the inflation target range in april this year, having declined steadily from 6. 6 % in january. it reached a low of 4. 6 % in july before rising to 4. 8 % in august and to 5. 1 % in september, in line with our forecasts. at the september mpc meeting, the headline cpi inflation forecast was 5. 3 % for 2017 and 5. 0 % and 5. 3 % for 2018 and 2019 respectively. a lower turning point of 4. 6 % was still expected in the first quarter of 2018. the forecast for core inflation – which strips out the volatile components of food, petrol, and electricity – and which is a reflection of underlying price pressures, was 4. 8 % for 2017, rising marginally to 4. 9 % and 5. 0 % in the next two years. these forecasts are markedly lower than those from earlier in the year. we remain concerned, however, that inflation expectations, as reflected in the survey conducted by the bureau for economic research, remain anchored at the upper end of the target range. this is particularly the case for the price - setters in the economy, i. e. business and labour respondents. we would prefer to see these expectations anchored at the midpoint of the target band. inflation at this level would bring our inflation rate closer to, though still remaining somewhat above, those of

we have seen the first defaults by issuers of sukuk. these defaults have raised many complex legal questions about the rights of sukuk holders, for example whether they have the right to take ownership of the underlying assets in the event of the issuers ’ default. until these legal questions are resolved there will be a long shadow over the sukuk market, and we have already seen the impact in terms of the volume of new issuance. the further development of this market depends on finding legal certainty and developing mechanisms to deal with issuer defaults. it is now also clear that islamic financial institutions have not been insulated from the secondround effects of the crisis. their customers have been just as badly affected by the economic downturn as have been the customers of conventional banks. recent events have also illustrated the risks of concentrating too many assets in specific sectors such as real estate. the principles of sound finance – do not concentrate risk, do not rely on collateral with unrealistic valuations – apply equally to islamic institutions as to conventional ones. these recent developments are what make the sessions that are planned for the next two days so very timely. i hope that the panels will be able to draw lessons from the crisis for islamic finance and that they will be able to assess the impact of the new global architecture on the industry. there can be little doubt that new regulatory policies on such matters as capital adequacy and liquidity will have major implications for the standards that are applied to the islamic financial industry. one of the most important lessons of the crisis has been the need for good liquidity risk management by financial institutions. given the problem of liquidity risk management is one that has confronted islamic financial institutions for a long time, the events of the past two years should give a new sense of urgency to our attempts to find a solution. corporate governance is another issue that i believe is very important. although none of the panels at this summit is specifically devoted to this subject it has been a focus of the ifsb ’ s work in the past, and i am sure it will be a recurring theme during the next two days. as i have said in the past, corporate governance is especially important for banks because they have a special task – that of looking after other people ’ s money. this places a heavy responsibility on their boards of directors and senior management. in the case of islamic financial institutions the responsibility is greater still since they must take into account the interests of investment account