However, as these temporary factors dissipate, economic slack declines further and inflation expectations remain stable, inflation should slowly move up toward the Federal Open Market Committee’s longer-run objective of 2 percent. Using data from the National Income and Product Accounts, this expansion so far has exhibited unusual features compared to previous long expansions. Most notably, the pace of growth during the early years of this expansion was well below that of the early years in previous long cycles (Table 1). Among the factors for the slower growth were unusually low contributions from residential investment and from nondurables and services consumption. In contrast, the contribution from durables consumption, particularly for motor vehicles, was similar to that observed in previous expansions. Even though real GDP growth has picked up some in the past two years, these patterns are still evident (Table 2). The slow growth during the current expansion, what we might call the long shallow recovery, is likely a result of a confluence of many factors including constrained monetary and fiscal policies, demographic factors and economic and financial developments abroad. Today, I’d like to consider developments in credit markets in the context of this shallow recovery. Credit availability is a crucial ingredient in any advanced economy’s recipe for economic growth because credit can support investment in productive enterprises and can smooth household spending from fluctuations in income. Credit is the means through which financial assets accumulated by savers can earn returns by being put to productive uses.
The first batch of CIFP graduates received their scrolls in February 2009 and all 32 have gained employment or have continued their studies further. This year, INCEIF will see the first batch of Masters in Islamic Finance graduate and next year will see the first batch of students to graduate from the PhD programme. This is indeed a significant milestone for INCEIF that is achieved in such a short period of time. As the Chancellor of INCEIF, it is my hope that the setting up of the INCEIF Chair of Islamic Finance will contribute to the development of expertise of the academic faculty and students at INCEIF in addition to expanding further understanding of Islamic Finance by the financial community. Please join me in welcoming Dr Abbas Mirakhor to deliver his lecture. 2  BIS Review 9/2010