the sharp spike in commodity prices and increasing risks from the us financial market which posed significant downside risk to future growth. as events began to unfold, this conjecture turned out to be the baseline case. when the great financial crisis of 2007 – 08 erupted with both economic growth and financial stability at stake, our decision not to raise interest rates was apt as it provided a much - needed buffer. we moved from being ‘ behind the curve ’ to ‘ ahead of the curve ’ when other countries began reversing their policies by cutting interest rates. fast forward to the current environment, inflation is becoming even more complex with the influence of various factors such as globalisation, demographics and technology bearing on inflation outcomes in ways we do not yet fully understand. because of these external factors, central banks in some economies have frequently missed their inflation targets over the past decade. these central banks have had to work extra hard to anchor inflation expectations while they continue to miss their targets. this has become a source of sizeable uncertainty and volatility. in malaysia ’ s case, keeping a broader view has suited our needs and has given us policy 3 / 7 bis central bankers'speeches flexibility to respond to economic and financial shocks, as we are not unduly straitjacketed into meeting this explicit inflation target, which, under many circumstances, can prove to be very elusive. third, as an open economy with flexible exchange rates, malaysia is prone to large and volatile swings of capital flows which can lead to exchange rate overshooting. in fact, we just recovered from what was one of the sharpest ringgit depreciation periods since the asian financial crisis. i am sure that this is still fresh in everyone ’ s mind. we recognised much earlier on that the inflation targeting framework is not well - suited to our domestic conditions as it can compound the risks of unfettered capital flows. instead, we believed that destabilising capital flows need to be effectively managed to ensure orderly domestic conditions. it did not help that some economies even hosted illegal ndf activities that had grave spillover implications on neighbouring economies. the fact that multilateral institutions are oblivious to these damaging consequences to some of their member countries is very disquieting. a further point is the dangers that can arise when inflation targeting inappropriately shifts the burden onto monetary policy to solve problems that in reality, require much broader policy responses on the fiscal side. when much needed actions are postponed, it has important consequences for our long term

but that day's traffic conditions will dictate whether you should take that route or an alternative to get home. you need to think about the alternative routes to get home and how long they will take if you are confronted with unexpected congestion. and, most likely, you will also have to communicate these alternative travel plans to family members so they have an idea of when you will arrive and how you will get the kids to after school activities. central bankers face the same problem : how will you set policy if the data come in different than you expected? it is important to not only lay out your base case, but also alternative paths for policy if your base case is disrupted by incoming data. and for monetary policy, it is even more important to communicate those alternative policy paths to the public so that they can also make plans. so, after reviewing the economic 1 / 6 bis - central bankers'speeches outlook, i will explore three possible data scenarios about inflation for the second half of 2024 and how those differing scenarios affect my view of the appropriate stance of policy. economic activity let me start with the economic outlook. real gross domestic product ( gdp ) grew at about a 4 percent annual pace in the second half of 2023 and then significantly slowed to a 1. 4 percent rate in the first quarter. recent forecasts indicate that output grew a little faster in the second quarter. we will get an initial estimate of second - quarter gdp next week, but the blue chip average of private - sector forecasts estimates that gdp grew at a 1. 8 percent pace in the second quarter, and the atlanta fed's gdpnow model estimates growth at 2. 5 percent. a big reason for the higher gdpnow estimate is because it was updated after yesterday's retail sales report. digging into that report, one finds that the data directly informing the bureau of economic analysis's estimate of consumer spending posted solid gains for june and revised up sales for both april and may. i suspect that this moderate consumption growth may continue in the second half of the year because personal income data is holding up. a signal of possible slowing in economic activity comes from the institute for supply management's ( ism ) survey of purchasing managers for non - manufacturing firms. nonmanufacturing firms constitute the large majority of businesses in the economy. the non - manufacturing index fell below 50 in june, suggesting a contraction in activity. as a part of that survey, " business activity, " corresponding to production or sales