We expect inflation to stabilize around 5 percent in the medium term (Chart 18). We expect inflation to considerably exceed the 5-percent target by the year-end, and decrease significantly as of the start of 2015 and fall to 6.1 percent at end-2015. This noticeable decline we forecast in inflation is driven by the projections that cumulative exchange rate effects will continue to taper off, food inflation will recede to past year averages and commodity prices, chiefly oil, will stay at expected lower levels. Moreover, we believe that demand conditions and the announced tight fiscal policy stance will support the decline in inflation in this period. The fluctuating course in 2015 inflation forecasts that you see on the slide stems from the base effects (Chart 18). Distinguished Guests, In addition to these forecasts, alternative scenarios on the inflation outlook and the global economy are discussed in the Risks section of the Inflation Report. You can examine the Report for details. While concluding my remarks, I would like to thank all my colleagues who contributed to the Report, primarily those at the Research and Monetary Policy Department as well as the members of the Monetary Policy Committee, and thank every one of you for your participation. BIS central bankers’ speeches  9
Credit is based on real savings and savings can only earn a return if directly invested in creating activities. Finance and the real economy are closely linked. In the Islamic system, banks can neither carry highly leveraged exposures nor acquire risky financial structured products. By the way, even if the Islamic nature of their finance is not the only explanation, we can note that Islamic finance countries, compared with those of conventional finance, have been relatively less impacted by the crisis. But on the other hand, Islamic banks pose risks to the financial system that in many regards differ from those posed by conventional banks, with respect, for example, to liquidity, operational and legal risks. Indeed, Islamic banks face specific obstacles in liquidity management, as the prohibition of interest has led to the underdevelopment of funding sources. Moreover, operational risk and legal uncertainty can be amplified by the lack of product standardization and the lack of harmonization of Islamic standards, with for example possible differences between Shariah scholars' interpretations, accounting standards, and so on. In the same way, prohibition from financing specific sectors limits the kind of eligible assets for investment, which contributes to increasing the risk of concentration in potentially cyclical sectors such as real estate. This is what happened in certain Gulf countries. •  As the analysis of the principles of Islamic finance does not settle the issue of the relationship between Islamic finance and financial stability, it needs to be supplemented by an empirical analysis.