By that criterion, inflation as projected in the Bank’s forecast will be at target for the entire forecast horizon through end-2017, apart for the last quarter of 2015 and the first quarter of 2016. According to the forecast, inflation will average 2.6% during the period 2014–17 and will therefore be at the 2½% target. If this materialises, it is hard to call it anything other than an acceptable performance. It is naturally less of a concern if inflation deviates temporarily from target if inflation expectations do not deviate in the same direction. Early this year, inflation expectations were above target even though measured inflation was below it. But fortunately, inflation expectations have subsided towards the target in the recent term and, by some measures, are close to it, particularly short-term expectations. This is important for monetary policy, as I will explain shortly. I have briefly discussed the current situation and the economic outlook. But what about uncertainties and known risks? There are risks attached to the global economy, which seems to be on the downside, at least in the near term, as regards both output growth and inflation. And there is the risk that our economic policy and contractual wage negotiations will not be successful, as has so often been the case during upswings. GDP growth will then be somewhat stronger in the short run, but the current account balance will deteriorate and inflation will rise, and ultimately GDP growth will fall below what it would have been otherwise.
Zeti Akhtar Aziz: Asian market integration and financial innovation Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the International Conference on “Asian market integration and financial innovation”, Tokyo, 10 February 2012. *  *  *  The world economy and international financial system is entering into a new phase of globalisation. Far from having an effect of slowing the pace of globalisation, the recent global financial crisis has intensified the process, resulting in a more connected and interdependent world. While – previously – globalisation manifested itself in the form of trade and investment between the emerging and developed world, emerging economies are now becoming more connected with each other within and across regions. This trend is being reinforced by similar changes in the pattern of financial flows. While previously, financial flows were predominantly between the developed and emerging world, greater financial integration among the emerging economies is facilitating the intensification of this connectivity. While unable to be in Tokyo, it is my pleasure to speak at this international conference on the topic of Asian Financial Integration. My remarks will touch on the main motivation for pursuing financial integration in Asia, despite the fact that its absence has not previously hindered economic integration in the region. Whilst Asia may draw lessons from the European experience, I will discuss the different approach that is being pursued in Asia.