We’re just adding a bit more fruit juice. Before I conclude, let me make a few comments about the Federal Reserve’s balance sheet. As you are undoubtedly aware, the Federal Reserve dramatically expanded the size of its balance sheet during and following the financial crisis to provide accommodation to support the economy when short-term interest rates were constrained by their effective lower bound. Currently, we are reinvesting maturing Treasury securities and agency mortgage-backed securities repayments to keep the size of the balance sheet generally stable. We have said that we plan to continue this policy of reinvestment until we are well along in the process of normalizing the level of the federal funds rate. As the FOMC has raised the federal funds rate three times, this process seems to have proceeded smoothly so far, prompting renewed interest in our balance sheet and reinvestment policy. The anticipation of and actual announcement by the FOMC of changes in reinvestment policy is likely to push up longer-term interest rates and tighten financial conditions somewhat, just as the earlier purchases pushed down long-term interest rates. To what extent is difficult to judge. Presumably, financial conditions would tighten by more if we were to end reinvestments earlier and more abruptly. This suggests a better course may be to taper reinvestments gradually and predictably. 5/6  BIS central bankers' speeches  In addition, because changes in reinvestment policy will likely tighten financial conditions, we will have to take this into account in our interest rate decisions.
All these developments reflect Singapore’s ideal position for asset managers to deepen and broaden their activities in the Asian time-zone. Annual accounts 28. On our financial statements, MAS recorded a net profit of $ billion for the financial year. The profits comprised mainly interest income, as changes in the valuation of foreign assets and the foreign exchange effects of a stronger Singapore dollar largely offset each other. Total assets, including the Currency Fund, grew by $ billion during the year to $ billion at end-March 2008. 4  BIS Review 94/2008  Remaining vigilant 29. We need to remain vigilant in the face of a number of risks in the global economic and financial environment. We will continue to work closely with the industry to identify vulnerabilities and threats to financial stability through macro surveillance and stress testing. MAS’ work in the coming year will continue to be driven by our mission of supporting noninflationary economic growth, and fostering a sound and reputable financial centre. 30. Thank you. BIS Review 94/2008  5