The inflation outlook is therefore favourable, as can be seen in the chart at the right, which looks past the changes in value-added tax that could possibly be implemented in the near future. Chart 3  “Missing” inflation Headline inflation has been below the Central Bank’s target for nearly four years, even though the negative output gap closed and then turned positive some time ago and wages have risen well in excess of what, in an average year, would be deemed consistent with the inflation target. This is not a unique case, however. In international circles, there is widespread discussion of “missing” inflation, which generally refers to the fact that wage rises are astoundingly small given the business cycle position in the country concerned. For example, countries as dissimilar as the US and Sweden are considered to be at full employment, yet wage increases are smaller than is consistent with the inflation target. In some countries, such as the US, this may be partly because the slack in the labour market is actually larger than conventional measurements indicate, as the labour participation rate is historically rather low. But this does not tell the whole tale, and in some countries it is not a very robust explanation.
The assessment methodology this time around will be different from the previous two assessments. It will not only depend on how good we are in achieving technical compliance to the international standards by having the necessary laws, regulations and policies in place, but importantly, the focus of the assessment will be placed on the effectiveness of AML/CFT measures being implemented taking into consideration the risk and context of money laundering and terrorism financing risks in Malaysia. It is important for me to stress that an overall positive rating in the assessment will strengthen the confidence in our financial system and therefore the country’s economic development. Our success in meeting the shared goal of protecting the integrity of our financial system against criminal abuse will continue to depend on the cooperation among the regulators, the financial industry and the law enforcement authorities. I am sure that this conference will provide a meaningful platform for all of you to engage, and importantly, to strengthen our risk management capabilities and in promoting higher level of integrity in our business conducts and operations. On that note, I wish all of you a fruitful conference. 4  BIS central bankers’ speeches