But, if a delay in monetary policy normalization or a very shallow trajectory in normalizing short-term interest rates were to cause inflation expectations to move meaningfully above our 2 percent inflation objective, then an inertial policy would likely become detrimental in achieving the FOMC’s objectives. The third, and related, issue I want to address is the care needed in using rules, such as Taylor 1999, as a guide to policy. As the paper convincingly shows, over time, financial market conditions have become a much more important factor in evaluating the appropriate setting of monetary policy and the level of short-term interest rates. This reflects several factors. First, over the past few decades the U.S. capital markets have grown in size and scope, and our financial system has become much less bank-centric. This has loosened the linkage between the federal funds rate and financial market conditions. Second, the U.S. economy and financial markets have become more interconnected globally. Thus, the impact of U.S. monetary policy has become more diffused, and financial market conditions have come to depend increasingly not only on developments at home, but also on developments abroad. As an example, the current low level of U.S. Treasury bond yields reflects, at least in part, the fact that long-term interest rates in Europe and Japan are much lower. While simple policy rules provide useful benchmarks for policymakers, their very virtue – their simplicity – is also a significant shortcoming.
Zamani Abdul Ghani: Growth and development of SME’s in Malaysia Opening address by Mr Zamani Abdul Ghani, Deputy Governor of the Central Bank of Malaysia, at the Top SMI Supporter Award Presentation, held at the Credit Guarantee Corporation Malaysia Berhad (CGC), Petaling Jaya, Selangor, 9 June 2008. *  *  *  Bismillahirrahmanirrahim Distinguished fellow members of the Board of Directors of CGC, Yang Berbahagia Datuk Wan Azhar Wan Ahmad,Managing Director of CGC Distinguished Guests and Representatives of Financial Institutions Members of the Media Ladies and Gentlemen Assalamualaikum w.b.t. and a very good afternoon On behalf of the Board of Directors and Management of the Credit Guarantee Corporation, (CGC), I am pleased to welcome you to this Top SMI Supporter Awards Presentation ceremony. This occasion is held in conjunction with the CGC's 35th Annual General Meeting that was successfully concluded just a while ago. I am pleased to note the encouraging representation made here today by fellow members of financial institutions. This signifies the importance that financial institutions attest to this CGC's annual award presentation ceremony. That said, allow me to record our appreciation to all of you for making this ceremony an important event in your calendar. This Top SMI Supporter Awards presentation ceremony, as you are all well aware, is an annual occasion. It recognises the active participation by financial institutions in CGC's credit guarantee schemes in particular, and contributions by financial institutions to SME development in general. We firmly believe such efforts should not go unnoticed.