Understanding these interactions is essential in assessing whether inflationary pressures are likely to prove persistent and thus calibrating the appropriate monetary policy response. On the basis of current futures prices, wholesale natural gas prices may stabilise or even fall somewhat in the coming months – indeed, that is precisely what we have seen in recent weeks. This will have a mechanical moderating effect on headline inflation from the middle of next year, as the MPC has anticipated in its latest forecasts. But, to the extent that the level of imported gas prices remains significantly higher than in the past – which is also foreseen in futures markets – then the threat of second round effects that sustain inflation at above target rates may well remain, as domestic firms and households try to resist the squeeze on their real incomes and spending power. That threat will be more acute to the extent that domestic firms and workers seek to protect the real value of their profits and earnings in the face of higher – even if no longer rising – imported energy prices. And – other things equal – the ability to firms and workers to protect their real incomes will be greater when corporate pricing power is stronger and labour markets are tighter.
Today’s allocation of zakat contribution to INCEIF by the three Islamic banks is another commendable act of industry in support of learning. INCEIF has received monetary contributions from several other Islamic financial institutions since 2007. This has enabled INCEIF to continuously enhance its internal capacity as the leading provider of Islamic finance education and knowledge. The contributions are being utilized to create the provision of scholarships, research and facilities development. In this regard, INCEIF has recently been accorded the “Project of National Interest” (Projek Berkepentingan Nasional) status. This status, which accords contributors with tax benefits in the forms of tax rebates for zakat contributions and tax deductions for non-zakat contributions, will incentivize more individuals and institutions in providing monetary support to INCEIF. The contributions will indeed go a long way towards the growth and development of Islamic finance in Malaysia and beyond. Thank you. 2  BIS Review 87/2010