Such a trade-off needs to take into account possible costs linked to households and companies having made decisions over a long period of time on the basis of what turn out to be incorrect inflation expectations.15 Moreover, one must assess the risks that a low inflation rate in itself entails. I consider it important to keep a respectful distance when prices are not increasing at all, so that one avoids deflation, which could lead to major problems for the economy. In addition, one must take a stance on how long inflation can be allowed to deviate from the target, given the other trade-offs, without having consequences for inflation expectations, for the credibility of monetary policy as a whole and ultimately for target attainment in the long run. As I said, the inflation target has been an anchor in many countries for a long period of time – for twenty years in the Swedish economy – and we almost take for granted that long-run inflation expectations will be around the target. They also still appear to be well-anchored around the target of 2 per cent in Sweden, although expectations in the shorter run are lower (see Figure 5). However, a monetary policy that explicitly leans against the wind is in many ways untested as a strategy and it is not clear how the participants in the economy will interpret inflation deviations in this context. One must therefore be careful.
Abdul Rasheed Ghaffour: Advancing financial literacy towards rebuilding financial resilience post-pandemic Keynote address by Mr Abdul Rasheed Ghaffour, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the National Financial Literacy Symposium (NFLS) 2022, Kuala Lumpur, 11 October 2022. *** Assalamualaikum w.b.t and a very good morning, Tan Sri Dr. Rahamat Bivi Yusoff, Chairman, Perbadanan Insurans Deposit Malaysia, Emeritus Prof. Datuk Dr. Norma Mansor, President, Malaysian Economic Association and our guest speaker today, Ms. Caroline Siarkiewicz, Chief Executive Officer of The Money and Pensions Service United Kingdom, distinguished panellists and guests. Let me also take this opportunity to thank the teams from Perbadanan Insurans Deposit Malaysia, Bank Negara Malaysia and the Malaysian Economic Association for jointly organising this Symposium. It is my great pleasure to be speaking to you here this morning. Allow me to start by reflecting on the theme today – "Advancing Financial Literacy Towards Rebuilding Financial Resilience Post-Pandemic". Indeed, the pandemic has revealed the importance of financial resilience, and the need for all of us represented here today – from the public sector, civil society, financial industry, business, academia, and international organisations – to support Malaysians in rebuilding such resilience as we emerge from the crisis. When Bank Negara Malaysia published our 1H 2022 Financial Stability Review recently, it included the findings of our Financial Capability and Inclusion Demand Side Survey for 2021.