of 2 percent. softness in energy prices, resulting from the weakening of global growth mentioned earlier combined with increased energy production here in the u. s. has contributed to the slowing of total inflation. however, it is also the case that core inflation, that is, excluding food and energy, has slowed sharply as well. a decomposition of core inflation reveals that some of the decline is due to slowing in the rate of increase in prices of non - food and non - energy goods. this probably is due in large part to the softening of global demand for goods and the modest appreciation of the dollar that has occurred since mid - 2011. in the service sector, the rate of increase in prices of medical services and “ non - market ” services – the latter includes some financial services – also has slowed notably recently. in contrast, the rate of increase in prices for other non - energy services has been relatively stable. comparing this set of conditions to that in 2010, the recent slowing of inflation has been less widespread across core goods and core services, and inflation expectations so far have declined less appreciably than they did in 2010. thus, my best guess is that core goods prices will begin to firm in the months ahead as global demand begins to strengthen and inventories get into better alignment with sales. as is always the case, there is substantial uncertainty surrounding this forecast. moreover, there is always the possibility of some unforeseen shock. thus, we will be monitoring u. s. and global economic conditions very carefully and will adjust our views on the likely path for growth, inflation and the unemployment rate accordingly in response to new information. at its recent meeting, the fomc decided to continue its accommodative policy stance. it reaffirmed its expectation that the current low range for the federal funds rate target will be appropriate at least as long as the unemployment rate remains above 6. 5 percent, so long as inflation and inflation expectations remain well - behaved. it is important to remember that these conditions are thresholds, not triggers. the fomc also maintained its purchases of $ 40 billion per month in agency mbs and $ 45 billion per month in treasury securities, with a stated goal of promoting a substantial improvement in the labor market outlook in a context of price stability. bis central bankers ’ speeches in its statement, the fomc said that it may vary the pace of purchases as economic conditions evolve. as chairman bernanke stated in his press conference following the

to hold a stock of high quality liquid assets that can be used to meet unexpected deposit outflows. these instruments include highly rated paper issued by sovereigns and by corporates. the regulators of the conventional industry have focused on the issue of liquidity because, pre - crisis, conventional banks increasingly relied on their access to short - term interbank markets to fund relatively long - term assets. borrowing short to lend long is, of course, fundamental to the business of banking. even so, there comes a point of which the degree of maturity mismatching is no longer prudent, and we saw with conventional financial institutions that the boundary between prudent and imprudent business conduct had been crossed. bis central bankers ’ speeches if we look at the trends in islamic banking in the years prior to the crisis, we can see that there are important similarities between the practices of islamic financial institutions and those of conventional ones. just like conventional institutions, islamic financial institutions increasingly funded long - term assets with short - term funding. although the assets and liabilities were structured in a sharia - compliant manner, the degree of maturity mismatching was just as great as was practiced by conventional institutions. in some cases where the asset involved a long - term development project, the degree of maturity mismatching was significantly greater than that practiced by conventional financial institutions. the conventional financial industry received a wake - up call during the crisis concerning the importance of understanding, monitoring and controlling liquidity risks. the islamic financial industry must recognise that it also needs good liquidity risk management. however, islamic financial institutions find it difficult to manage their liquidity risk given the relative lack of short - term money market instruments in which they can invest. the cbb has been at the forefront of innovation in assisting islamic financial institutions to manage their liquidity, but more still needs to be done both by regulators and the industry. so, does basel iii offer a solution? obviously, islamic financial institutions cannot invest in interest - based products. this makes the specific liquidity requirements of basel iii difficult to apply to them. there is also the complication that the outstanding stock of sukuk is not sufficiently large to enable all islamic financial institutions to meet a liquidity ratio comparable to that mandated under basel iii. finally, the markets for sukuk are not always as liquid as those for conventional government bonds and therefore even if an islamic financial institution invests in them it might not always be able to find a ready buyer when the need