I know of no-one who has argued that the problem with the UK economy is that it has not had a sufficiently deep recession. Inflation rose to over 5% but has now come down to 2.7%, and the Committee believes that it is likely to come back to the target over the next two years. In effect the MPC has allowed a longer inflation overshoot than usual in order to avoid pushing up unemployment. Our current remit does not specify how the MPC should strike a balance between growth and inflation in the short run. The horizon over which inflation should come back to target is effectively delegated to the MPC. But should the MPC itself choose how quickly to bring inflation back to target, or should the government use its annual remit to set that horizon? Is there a gain from trying to quantify how the MPC should manage the trade-off between growth and inflation in the short run? The recent guidance by the Federal Reserve about the conditions under which it would continue to hold interest rates at close to zero is a way of quantifying the “flexibility” in flexible inflation targeting. It describes how the Federal Reserve will interpret its freedom to balance its twin objectives for employment and inflation.
Sukuk has drawn strong interests as an attractive source of funding and a new asset class. UK, Hong Kong, Luxembourg and South Africa issued sovereign sukuk last year. With this leadership taken by the British Government, UK became the first non-Muslim country to issue sovereign sukuk of GBP200 million that attracted strong demand of more than 10 times. Hong Kong issued the second sovereign sukuk in 2015 following its successful inaugural issuance. The sovereign issuances are hoped to pave the way for corporate sukuk issuances particularly from these jurisdictions. Another landmark transaction is the syndicated Islamic financing facilities of GBP467 million for the Battersea Power Station Phase 3 project in London. The involvement of our Malaysian players in some of these global transactions has encouraged cross-border business transactions and enhanced collaboration with players in other jurisdictions. Despite the above, sukuk recorded a lower amount of new issuances of USD40 billion during the first half of 2015 due to a slowdown in the current global financial markets and still-low oil prices. Malaysia remained the key jurisdiction for sukuk origination with issuances of USD19.8 billion or 50% of total market share. Malaysia has evolved into a multicurrency sukuk issuance marketplace with issuances in US Dollar, Chinese Renminbi, Singapore Dollar and Japanese Yen. Our banks, Islamic fund management companies and professional service providers, some of whom are with us today, have global capabilities and expertise in advising and managing cross-border financing and investments.