muhammad bin ibrahim : monetary policy autonomy – intricacies, instruments and independence luncheon address by mr muhammad bin ibrahim, governor of the central bank of malaysia ( bank negara malaysia ), at bank negara malaysia's monetary policy conference 2017 " monetary policy autonomy : intricacies, instruments and independence ", kuala lumpur, 24 july 2017. * * * monetary policy was thought to be a relatively simple and straightforward business. it was widely concluded that all that the central bank needed to do was conduct monetary policy in a way consistent with the inflation - target and ensure that employment levels are satisfactory. life should have been easy for central banks. the holy grail of monetary policy was achieved. central banks had finally understood how monetary policy should best be conducted. this was one of the primary explanations for the great moderation – the period of prolonged macroeconomic stability that preceded the 2007 – 2008 global financial crisis. today, the situation is markedly different. conducting monetary policy is anything but easy. for the advanced economies, despite almost 10 years of easy monetary policy, inflation is still persistently below target and economic recovery remains slow and fragile. the latest enigma is strong growth devoid of inflationary pressure. for open economies, especially in emerging markets, we are left to manage the spillovers of extraordinary policy measures implemented in the advanced economies. these spillovers have had tremendous implications on emerging market central banks through macroeconomic and financial instability, financial and foreign exchange market volatility, and more importantly, the ability and autonomy of central banks in the region to conduct monetary policy. so much attention has been focused on the advanced economies – the growth recovery, policy trajectory and political uncertainty. not enough has been discussed on the countries at the receiving end of these uncertainties, and the difficult circumstances under which emerging market central banks have had to operate in recent years. this will be the focus of my remarks today. i intend to describe a few reasons on why it has been a real challenge for emerging market central banks to conduct monetary policy in recent years than in the period prior to the global financial crisis. i will then discuss the policy thinking and tools from the perspective of an open economy when facing the challenges that emanate from global policy - spillovers. lastly, i will share my view on the importance of having utmost autonomy in policy - making and suggest what we and the global community can possibly do to improve independence in policy decisions. global developments since the crisis have added extra layers of complexity in policymaking for most

is integrated into a chip card and combined with credit and debit card functions. the other route to success is to link the electronic purse function more specifically to a particular type of purchase which people have to make in their everyday lives. that has been demonstrated in hong kong by the success of the octopus card. as at end - september, 5. 6 million octopus cards have been issued, recording 3. 8 million transactions per day. at this level, octopus must be one of the largest stored value card systems in the world. as regards electronic delivery channels, five banks have already launched transactional websites in hong kong, and a further twelve have told us that they are at the planning and development stage. mobile phone banking is also very much a live issue. once y2k is out of the way, i think that we will see a spate of further activity in this area. this reflects the fact that banks are increasingly becoming aware of the need to supply the e - banking product while hong kong has a population very ready and willing to accept new technology. moreover, with 200, 000 km of fibre optic cabling, linked to more than 1, 500 buildings, hong kong has one of the finest telecommunications infrastructures in asia. the financial infrastructure is also one of the most advanced. on the legal front, the government has already introduced a draft bill into the legislative council to facilitate electronic commerce by granting legal recognition to digital signatures and by establishing a licensing system for certification authorities. hong kong post is establishing a public key infrastructure for hong kong and will launch its certificate authority service before the end of this year. the hkma welcomes and fully supports these initiatives. implications for banks the prospects for e - banking in hong kong are therefore favourable. however, there are also risks to be managed, and i shall be looking at these more closely. banks are of course already used to dealing with at least some of the issues that crop up in an electronic banking environment, and so have built up experience and expertise to deal with these. however, i do believe that the internet, because of its low cost, global reach and versatility raises the stakes for the banks – both in terms of the opportunities it presents as well as the risks. strategic risk in talking about these risks, let me start at the top – with the issue of strategic risk. in other words, will the bank get it right? will it make the right choices when it comes to investing in e - banking or will it waste money