Finally, while business investment in equipment and software rose strongly last year, by almost 14 percent, the level of investment is still not as high relative to GDP as we’d expect, given favorable economic conditions and firms’ healthy balance sheets. Economic growth has been solid for a few years now. And, with the very low level of interest rates, borrowing costs can’t be the problem. Moreover, profit margins have been high for some time, so firms are certainly not strapped for cash. The shortfall might be due to business caution, perhaps related to reverberations from 9/11 and subsequent terrorist threats and actions or perhaps to the corporate governance scandals and the adjustments required by the legislation that followed them. Alternatively, the investment shortfall might reflect the perception by businesses that productivity gains can be realized at this stage that do not require major new investments in equipment and software. Whatever the explanation, the consequence of these drags is that the Fed had to keep interest rates exceptionally low for a long time just to get respectable, but not stellar, economic growth. In fact, the federal funds rate was lowered all the way to 1 percent and held there until the middle of last year. Since then, the FOMC has raised the funds rate nine times to 3¼ percent, but it still remains in a range normally considered stimulative. Bond rate conundrum Increases in the federal funds rate typically lead to increases in longer-term interest rates.
Jessica Chew Cheng Lian: Financial advisers the future – rise of the new wave Keynote address by Ms Jessica Chew Cheng Lian, Assistant Governor of the Central Bank of Malaysia, at the 2nd Annual Conference of the Association of Financial Advisers “Financial advisers the future – rise of the new wave”, Kuala Lumpur, 31 October 2013. *  *  *  It is my great pleasure to be here this morning at the 2nd annual conference of the Association of Financial Advisers (AFA). This year would be the eighth year that financial advisers have been a part of the financial landscape in Malaysia. As the industry looks to the future, I think it is useful to also look back to the motivations for developing financial advisers in Malaysia. Fundamentally, the objective was to improve the quality of advice on insurance solutions that was being provided to consumers. Before financial advisers, such advice was mainly only available in this country from tied agents and this system had certain limitations in terms of incentive structures and the breadth of products that the agent could draw on to advise consumers. A second objective, and perhaps one that has not been emphasized enough, is the expectation that financial advisers would be able to help individuals and households with a broader financial outlook. This means helping individuals and households understand how insurance fits within their broader financial management strategies to grow their savings, manage risk and meet specific financial goals.