Changes in the international division of labour, integrated financial markets and increased competition in broad goods and services markets are more permanent. Globalisation and cyclical developments have been kind to the Norwegian economy. Few countries are benefiting as much as Norway – and losing as little – in the current environment of freer trade in goods and services and cross-border labour mobility. 3. Challenges to monetary policy After almost two decades of high inflation, the rise in prices stabilised in many countries in the 1990s. The year-on-year rise in prices in the industrial countries was about 13 per cent at the beginning of the 1980s. In the course of the following decade, it fell to below 2 per cent. Today, most central banks orient monetary policy towards low and stable inflation. 2  BIS Review 10/2006  The practical implementation of monetary policy can vary, but the common objective is price stability. Low and stable inflation has contributed to solid growth in the global economy in recent years. Despite rising oil prices, international conflicts that have led to uncertainty, and other disturbances, the impact on inflation and output has been moderate. The perception in Norway in the 1960s and 1970s, as in other countries, was that strong growth and low unemployment could be achieved if we were only willing to accept somewhat higher inflation. But it was gradually recognised that this was not the case.
Of equal importance is also to integrate the domestic Islamic financial system with the international financial system. For more than two decades, we have witnessed the success of the development of each of these respective components that has contributed to the rapid expansion in Malaysia's Islamic financial services industry. Indeed, we have seen the development of a comprehensive Islamic financial system. This has placed the Malaysian Islamic financial system at the forefront of the global Islamic financial system. Notwithstanding this, there have been imbalances in the pace of the growth of the components of the financial system. While Islamic banking, being the core component, has recorded significant progress, more efforts need to be directed to promote the growth of takaful and the financial markets. My remarks today will focus on measures to accelerate the growth of the Islamic financial markets by strengthening its required linkages. Of most importance is the development of a wider range of Islamic financial instruments, developing the relevant indicators to support benchmarking and an efficient pricing mechanism as well as to actively promote the role of the market players. Development of a wider range of Islamic financial instruments For Islamic financial institutions to effectively manage its funds, there is a need to have diversity in the type and the maturity of the Islamic financial instruments. This is one area in Islamic finance that offers formidable challenges and opportunities to market participants in Malaysia. A broader range of products and services is vital in this fast changing global financial landscape.