Labour markets and jobs

1. The occasion

The Governor of the Reserve Bank of Australia returned to the University of New England in Armidale, the regional town where she grew up, to receive an alumni award and an honorary doctorate. She used the ceremony to speak to new graduates about careers rather than about interest rates. Her father once ran the university's mainframe data processing, which gave the visit a family dimension.

2. A career that was never planned

She recalled hesitating at seventeen between a place in medicine in Sydney and economics at home. A conversation with the head of the economics faculty, who told her that university economics relied heavily on mathematics, tipped the balance. A summer cadetship at the central bank in her third year then led to an honours year and, in 1985, a permanent job as a graduate economist. Her advice is to accept interesting offers even when their destination is unclear.

3. Purpose

Central banking looks like a world of figures: prices, jobs, forecasts and rate decisions. She argued that its real subject is people, since Parliament asks the bank to serve the prosperity and welfare of Australians. Knowing how one's work feeds into something bigger is, in her view, what keeps a person going through difficult periods, whatever the profession.

4. Perspective

Graduates from science, farming, business and law will meet colleagues with very different backgrounds. She sees this variety as a strength: the members of the bank's monetary policy board come from contrasting careers, which improves debate and decisions. Her regional upbringing makes her attentive to differences between parts of the country. The bank's liaison program with firms and communities, and a visit she once made to a national debt counselling service, showed her realities that aggregate statistics hide. She wants economics to attract people from a wider range of communities.

5. Change and technology

Automation and artificial intelligence are reshaping work, and nobody can yet say how. She noted that this has happened before: the bank's large typing pool vanished within a few years of her arrival, while new skills became essential. Because the most useful skills are hard to foresee, she put the emphasis on lasting human qualities: sound judgement, honesty, flexibility, teamwork and good working relationships, which technology can assist but not replace.

6. Closing message

Having a precise plan or not having one are both acceptable, since the openings that shape a career are often invisible at the start. She encouraged graduates to keep a clear purpose, listen to people unlike themselves and treat change as a source of opportunity, and she invited some of them to apply to the central bank one day.

1. Twenty-five years of the anti-money laundering law

Abdul Rasheed Ghaffour, Governor of Bank Negara Malaysia, used a compliance conference to mark 25 years of Malaysia's 2001 anti-money laundering act. He credits progress to repeated legal amendments, coordination bodies such as the national anti-financial crime and scam response centres and the national fraud portal, five national risk assessments, and supervision of more than 27 000 reporting entities, which earned a positive international evaluation in 2025. Results he cites: about RM1.9 billion of fraudulent transfers blocked in the first half of 2026, more than in all of 2025, and over RM37 billion of assets recovered in five years.

2. New threats

He sees two pressures. Geopolitical fragmentation is changing payment routes and trade corridors and straining cooperation, so it must feed into risk assessments. Technology is accelerating crime: AI-made fakes of voices and faces make scams harder to spot, around 95% of online fraud involves victims tricked into sending money themselves, and INTERPOL estimates AI-driven fraud is several times more profitable than older methods. Detection, he argues, must be automated as fast as deception.

3. Data and collaboration

The central bank, as financial intelligence unit, is investing in data-driven analysis. A pilot of the national fraud portal has flagged over 1 600 suspicious accounts that may be used as money mules, and new policy documents tighten technology risk management and banks' accountability for fraud. Banks and the payment network plan warnings that alert customers before a risky transfer is completed, with a pilot targeted for the first half of 2027, accepting some extra friction. He wants a shift from reacting to preventing fraud, more structured information sharing between firms and with the state, and stronger cross-border cooperation, ending with a call to anticipate, monitor, use technology responsibly and act jointly.

1. A setting tied to reunification

Bundesbank President Joachim Nagel spoke at the annual banquet of Rostock's merchants' association, a centuries-old tradition revived after reunification, on the eve of German Unity Day. He recalled the 1990 introduction of the Deutsche Mark in the East, noted that output per person there is still about 28% below the West, and stressed that strong and weak regions exist in both parts, with Rostock having grown into a science and technology hub.

2. A recovery with weak foundations

Germany did better than expected in the first half of 2026 despite tariffs and the Middle East conflict, and may grow by about 1% this year after three flat years, helped by debt-financed spending on defence, infrastructure and climate and by solid foreign demand. But Bundesbank experts put potential growth at only 0.4%, a third or a quarter of its pace ten years ago, because of labour shortages as baby boomers retire, low business investment and almost no productivity gains. To get back to regular growth of 1% or more he suggests more full-time work by women, removing incentives for early retirement, managed immigration in a welcoming climate, and faster, digital, simpler administration. He credits the government with tackling many issues but says it could move faster.

3. Pension reform

With about 800 000 young people entering working age each year against 1.2 million reaching retirement age, pension finances are under strain. He supports the pension commission's proposals: tying the pension age to longevity, raising it by two-thirds of any gain, as the Bundesbank had urged; ending penalty-free retirement after 45 years of contributions except in hardship cases, since it mainly benefits healthy people with high entitlements; and adding a mandatory funded pillar on the Swedish model, which raises contributions for a time but pays off over the long run. He warns that failure on these points would cast doubt on Germany's ability to reform.

4. The digital euro

Stressing that Germany alone is too small to weigh internationally, he backs a savings and investment union, a digital single market and greater digital independence. The digital euro would cut reliance on non-European payment firms, work across the euro area on phones, collect minimal data, allow almost cash-like offline payments and lower merchants' fees. He rejects claims that it would enable surveillance, be programmable, crowd out private solutions such as Wero or replace cash, and expects a decision in Brussels this year and an introduction from 2029. He concludes that change must be accepted if burdens are shared fairly.

1. Argentina's assets in a changing world

Welcoming Argentina's President and government to the OECD during Argentina Week, Secretary-General Mathias Cormann argued that global trends now favour what the country has: farmland that makes it a top grain and soybean exporter, roughly a fifth of known lithium resources, strong wind and sun, and a software, engineering and biotech sector that exports. Supply-chain rethinking, food and energy security, the energy transition and AI all raise the value of those assets, but only stable macroeconomics, predictable rules, contract enforcement, competition and openness turn them into prosperity.

2. The turnaround so far

From 2011 to 2025 Argentina grew by only about 0.8% a year, labour productivity shrank and inflation hit 220% in 2024. Since then, a large fiscal adjustment restored a primary surplus, currency controls were largely lifted, competition barriers fell and trade opened; growth resumed in 2025 and the OECD expects 2.6% in 2026 and 3% in 2027. Its regulation index shows Argentina moving from one of the most restrictive of 48 economies in 2018 to one of the biggest improvers by 2025.

3. Four priorities and the role of accession

He recommends further deregulation, which could raise potential output by 6.8% and jobs by 2.2% by 2050; better schooling, since only a quarter of students reach basic maths level against nearly two-thirds in the OECD; deeper capital markets through governance reform; and more trade integration, intellectual property protection and responsible mining and energy. Accession, reviewed by 25 committees, would show investors that reforms can survive changes of government.

1. Opportunity and risk together

Speaking to EU finance ministers in Dublin, Georgieva said Europe must grow faster to keep its social model and should use the current leap in technology to do so. The gains come from reinventing products, processes and workflows, not from the technology alone, and AI's pace punishes hesitation. Europe has to sit inside the whole value chain, as provider, builder and adopter, yet it now trails the United States, China and several Asian suppliers.

2. Four channels of impact

In the short run the AI building boom is a positive demand shock that lifts growth and inflation, amplified by its appetite for energy. Later it becomes a supply shock: global potential growth could rise by roughly a tenth to eight tenths of a point a year, with Europe aiming for the upper half; the inflation effect depends on timing and on whether labour disruption erodes consumer demand. It could touch up to sixty percent of jobs in advanced economies, widening polarisation and hollowing out the middle. In between lies a period of maximum risk, since disappointment tends to come first and frontier models may outrun oversight.

3. Financial stability

An AI-led market correction ranks among the risks taken most seriously. Rising leverage could force selling, circular financing between investment, debt and revenue commitments could reverse, and large cross-border holdings of American shares would spread losses worldwide. Supervisors must make sure the system can withstand that test.

4. What Europe should do

Europe will have to build AI as well as adopt it. It ranks well on readiness, with seven of the top ten countries, but firms face bank-dominated finance, heavy regulation, some of the highest power prices in the world and narrower adoption than American firms. Five priorities follow: patient risk capital and a pan-European venture industry, together with a rethink of taxation as income shifts from labour to capital; an energy union and data centres sited where power is cheap; the optional 28th corporate regime to ease entry and exit; smoother job transitions through retraining and protection of workers rather than posts, citing Finland and Denmark; and a state that leads by adopting AI and building digital public infrastructure. Europe's AI rulebook looks prescient, but guardrails only matter if there is something to guard, so competitiveness must be preserved.

1. Energy, the Gulf conflict and the refining wedge

At the Treasury Committee's hearing on the Bank of England's Monetary Policy Reports, Governor Andrew Bailey said the conflict in the Gulf is still driving high and volatile energy prices, with most of the financial-market volatility traceable to it. The Strait of Hormuz remains largely shut; pipelines are being used more, but even they are exposed after Houthi attacks in the Red Sea area, and emergency stock releases that have helped can only run until about November. Oil production has risen somewhat elsewhere. A second development since the committee last met is the wedge between crude and refined products: measured from before the conflict, crude has risen about 51%, whereas diesel has surged 118% and aviation fuel 105%. Part of that gap has nothing to do with Hormuz, because Ukrainian strikes have cut Russian refining capacity, perhaps by around 60%, and some US refineries are running hot or closing, so even a settlement in the strait would leave the refining squeeze in place. Asked whether overworked refineries could run into maintenance problems, he agreed this is a concern, above all in the United States, where facilities are working at high rates while a couple of planned closures also tighten capacity, which could keep the wedge elevated for some time. Deputy Governor Dave Ramsden added that maintenance cannot be postponed indefinitely and that attacks on installations, such as a Saudi refinery hit by the Houthis, make crude and product prices harder to predict the longer the war lasts.

2. Why members voted as they did

Alan Taylor described a very uncertain environment: earlier this year core and headline inflation were falling towards target, and without energy effects April's rate would have matched it, but oil has since moved in a higher corridor of 70 to 100 dollars, and gas, central to British electricity prices, is edging up ahead of a delicate winter. In his view, the outcome depends on which comes first: the expiry of stopgap measures or the adjustment of firms and households on both the demand and supply side. Megan Greene, who voted for a rise, argued that after six months of volatile energy costs the risk of second-round effects justifies a risk-management approach: if the Bank tightens and the effects do not appear, it can course-correct cheaply, whereas if it waits and they do, inflation is hard to get back under control. Conclusive evidence on second-round effects may not arrive until next year, and policy must act on lags. Ramsden, who voted to hold, saw the domestic picture as benign, since private-sector regular pay grew 2.8% in the second quarter against 3.2% expected before the conflict, while seeing global risks, from energy, extreme weather, drought and AI, as mostly on the upside. He still counts unchanged rates as restrictive, as he had expected cuts in spring. Taylor made a similar case: domestic inflation has been coming in below forecast for 12 to 18 months, and by not cutting as expected the Bank has actively kept policy tighter than peers, which is a form of insurance. Greene admitted she has no special insight into how the war will end, which is exactly why she prefers to minimise potential losses, and Taylor said the staff's monitoring will concentrate on wages and on how far energy costs spill into other sectors, compared with earlier energy shocks, adding that he regards the unchanged rate as an active decision rather than inaction. Greene differs mainly in her starting point, noting that agents report slightly lower pay settlements this year but that, with inflation about to accelerate, next year's may not be much lower, which would suggest wage disinflation is stalling, citing weaker wage disinflation, household inflation expectations already at the top of their historical range, and thresholds above which households and firms pay more attention to price rises.

3. Conditional statements, the market curve and mortgage rates

Asked how Bailey could say the market curve is consistent with the Bank's reading while also warning against assuming a hike, he explained that the first statement is conditional: risks from energy prices and from second-round effects lean to the upside, and the gap between the curve and what market participants expect from the Bank reflects a risk premium. The second pushed back on an unconditional reading that the Bank has a secret plan to raise rates. He sided with the new Fed Chair Kevin Warsh that forward guidance, which tries to turn conditional statements into unconditional ones, is dangerous, though he is sometimes frustrated that his conditional remarks are heard as promises. On financial conditions, he noted that UK mortgage rates are about 75 basis points above their level when the conflict began, the largest rise in the G7 with the possible exception of Japan, which is a genuine tightening that the Bank takes into account, but not a case of letting markets do its work: both markets and the Bank are responding to the same upside risks. Pressed on whether this market-driven tightening can substitute for a rate rise indefinitely, he said financial conditions are simply another piece of data the committee weighs, and that the effect on families is taken into account. Ramsden explained that the monitoring framework for second-round effects relies on the decision-maker panel and other forward-looking surveys, with the main difficulty being wages, because most settlements happen around the turn of the year and the conflict began after the 2026 round was done.

4. Communications after the Bernanke review

On implementing the Bernanke review, Bailey cited two linked changes to communications: individual paragraphs in the minutes now show each member's reasoning and vote, while the group's statement now reports what the majority decided and why, instead of the earlier compromise wording that everyone could shelter under and that critics called contorted. Scenarios are also a product of the review, and the review has an iceberg below the surface in data, models, tools and use of AI. Some outsiders find nine separate explanations confusing, but he reports positive feedback overall and a clearer picture of where each member stands and why. Asked whether the three-scenario approach without a stated central forecast helps, Taylor replied that this was specific to the period of grave uncertainty right after the conflict began, when a single central path might have misled, and the Bank has since returned to a baseline. Taylor said there are three balances to strike: the quantity and quality of information (too much is like too much salt), a clear central view without unconditional guidance, and individual accountability alongside a strong collective message; communicating the reaction function through scenarios builds credibility, and the aim is to subtract noise, not add it. Ramsden recalled that scenarios replaced a single forecast in April because uncertainty was so great, before the July report returned to a baseline with adverse and benign scenarios. Ramsden judged that market volatility after both the April and July publications was limited, a sign the message about policy and its risks got through, and Taylor said the central forecast remains a baseline that expresses a view while the scenarios convey how the committee would react to other developments. Bailey and Greene noted that the Bank's nine-member, individually accountable structure, and the unusual practice of several members appearing before a legislature, makes it fundamentally different from the Fed.

5. Food, El Niño and chips

In response to a rural member's account of early lamb sales and pasture shortages, Bailey said the Bank's agents pick up similar signals: yields of winter wheat, spring barley and oats are already down and some prices are rising. An El Niño is building, which historically affects rice, coffee, cocoa and palm oil. Food inflation has so far come in below expectations, at 1.7% in July, but the Bank expects it to rise to about 3.5% by year-end and sees risks as skewed upward; trade bodies have trimmed earlier forecasts of 6-7%. Ramsden said the lesson of 2022 is to watch fertiliser and input costs for next year, and that central bankers from nations already feeling the El Niño reported food price effects at the Basel meetings, and those will reach Britain with a lag. Bailey was cautious about linking El Niño to climate change, while accepting global food prices are more volatile. Greene made the point that frequent shocks mean volatility rather than ever-rising inflation, and she added that no one knows how supply shocks interact, such as AI chip demand, the Iran war and others. Staff modelling suggests chip price pressure could add about 0.1 percentage point to consumer prices. Ramsden added that food is a necessity, so what matters is whether shocks are global and whether consumers can substitute, for example away from dear meat, and that with few favourable supply shocks lately, prices are more likely to ratchet up than down.

6. Quantitative tightening, the 1844 Act and reserves

Ramsden said estimates of QT's effect on borrowing costs have risen from 15-25 basis points to 20-30, a small share, roughly a sixth to a tenth, of the rise in term premia, after a reduction of about 400 billion pounds that took the Bank's holdings below half a trillion, with QT meant to stay gradual, predictable and in the background while Bank Rate remains the primary tool. He defended QE as a tool at the zero lower bound and in the pandemic, though a third round of 150 billion over twelve months should have had a review point, and he voted against completing it as inflation worries grew. On the fiscal losses from QT, Bailey explained that under the 1844 Bank Charter Act the note-issue department's profit, the seigniorage, goes straight to the Treasury, whereas the Fed and the ECB keep everything on one balance sheet, offset losses against seigniorage and book a negative asset. The UK approach is more transparent but makes the losses visible, though in economic terms it makes no difference to the taxpayer, and the Government also gained from issuing long debt cheaply in the zero-rate period, a benefit the Bank now publishes an attempt to net against the losses, which comes out roughly flat. Most reserves, he added, are held for financial-stability reasons. He would not comment on fiscal policy or proposals to tax banks, but argued that paying interest on reserves is how rate decisions are implemented and that stopping it would cut bank margins and most likely be passed on to customers.

7. The economy, labour market, AI and young people

Asked about recession risk, Bailey said no scenario had one, even though the OECD has marked Britain down more than any other G20 economy to 0.7% growth for 2026; activity is weak by historical standards but resilient, balance sheets are sound, household saving has been high, and data since the report have come in somewhat stronger. Second-quarter growth was 0.4%, above expectations, consumer confidence is the highest since August 2024, and the June GDP figures should support the third quarter, though Taylor and others noted a recurring pattern of stronger first halves that the statistics office attributes in part to changed seasonality. Real post-tax labour income grew 3.3% on average from 1998 to 2007 but only 1.5% since the financial crisis, so productivity remains the central challenge. Asked to separate external shocks from the effect of higher employer payroll taxes on hiring, Bailey said softer second-round effects imply that firms are absorbing some costs in margins, so hiring is lower and the labour market is softening, with youth unemployment concerning; Ramsden stressed that there is less firing too, giving low turnover. Greene said early data show fewer vacancies in AI-exposed sectors, but the low-hire, low-fire dynamic matters more for young people, and much of what firms call AI is really automation. Bailey cited a four-part framework of jobs destroyed, created, augmented or reduced in demand, and warned that long spells outside work scar future prospects, so skills matter, with a tension between universities worried students will only use AI and employers wanting AI users. Taylor put the slowdown in long-run context: advanced-economy growth has decelerated for fifty years, so falling to zero from 1% is easier than from 3%, and he warned against overstating resilience, since without the conflict hiring and optimism would probably be stronger and the damage to long-term supply potential lower. Bailey said recent productivity gains are mostly in some service sectors rather than AI-heavy ones and could simply reflect fewer workers. Ramsden expects a premium on technological literacy. Greene also called UK consumers a puzzle: they behave like euro-area ones, saving heavily, saying it is a bad time for big purchases and yet not fearing for their jobs, which could reflect precautionary hoarding after inflation or mortgage resets and would imply opposite policies.

8. Global imbalances, trade and the Bank's own house

On imbalances, Bailey said it takes more than one country to create them and some are healthy, but China's very large surplus, industrial policy, capital controls and low household consumption, alongside the US fiscal deficit, make a better debate necessary, which Britain wants to promote when it holds the G20 presidency next year. Ramsden pointed out that Britain is among the world's largest services exporters, with a comparative advantage in finance and professional services, as the global trading system intends. Britain runs a goods shortfall against China, partly offset by services, though the services surplus, which includes education, is smaller, and he sees AI and robotics as the next general-purpose technology that the UK must be part of. Greene noted that imbalances reflect savings and investment everywhere, so China, Europe and the US would all have to adjust. Taylor said trade diversion is a slow burn, citing Chinese electric vehicles and overbuilding that will find other markets, and Bailey agreed to write with an estimate of tariffs' effect on UK inflation, which staff think is smaller than first feared. On staffing, just over 400 people are leaving the Bank under a mutually agreed resignation scheme out of about 700 applicants, to shift spending towards systems and data, a need sharpened by frontier AI. On new banknotes, whose reverse will carry wildlife chosen by almost half a million people from a curated panel, there is no date and Bailey said it will not happen in his term.

1. The question of legitimacy

Speaking at an LSE conference, the Governor of the Bank of England examined independent central banks as institutions. He recalled that in 1780 a young Alexander Hamilton admired how the Bank of England combined public authority with private credit. Since central banks shape borrowing costs, savings, jobs and financial stability, critics ask why unelected bodies should hold such power: some say they serve financial interests, others that they ignore citizens' wishes. He set out to answer by tracing the ideas behind them.

2. Two intellectual traditions

Economists usually justify independence by credibility: governments are tempted by short-term monetary choices and tend to neglect financial stability until a crisis is near. Bailey went further back. Montesquieu wanted intermediate bodies, such as courts and parliaments, to restrain arbitrary power, though their authority grew from long-standing roots. A second line of English thought moved money away from the sovereign's control: Hobbes saw monetary power as part of sovereignty, while Locke, in the coinage disputes of the 1690s, argued that changing money's value at will destroyed trust and trade, and Hume presented stable money and credit as foundations of commercial prosperity. Monetary stability thus became a public good.

3. The early Bank of England

The Bank was founded in 1694 to support expanding commerce and to fund war with France. It began as a deal between the state and a small circle of wealthy financiers and was deeply involved in politics; writers at the time feared that public debt would give financiers power without legitimacy. Central banking therefore evolved slowly, and its origins resemble Mancur Olson's organised interest groups more than a neutral public institution.

4. Public good, not group interest

Modern central banks combine both traditions: they limit the misuse of power over money and protect a good shared by all. Drawing on Brian Barry, Bailey distinguished competing private interests, which democracy arbitrates, from goods that matter to everyone, such as the value of money. Interest rates and financial rules do affect groups differently, but their purpose is to preserve conditions for lasting prosperity. Lacking deep social roots, a central bank must avoid being captured by any sector or movement. Its legitimacy comes from Parliament, which sets its goals and powers and can change them.

5. Today's challenges

Trust in public bodies is falling. Critics say central banks are too close to finance, while banks complain that regulation has gone too far; criticism from both sides does not prove the bank right, but shows that independence means resisting organised interests. Populism is a second threat: by claiming to embody the whole people, it erases the line between public interest and public good and treats independent bodies as obstacles. Central banks must therefore explain their choices, engage with the public and answer to elected representatives, in Britain the Treasury Committee.

6. Conclusion

Scrutiny is healthy. Prosperity depends on confidence that money keeps its value and the financial system holds. Independence means protection from short-term political pressure inside a democratic framework, resting on delegation and accountability, which should be strengthened through transparency and openness. Households, firms and markets all plan on the basis of stable money, and such trust takes generations to build but can be lost quickly, which is why he argued that the foundations of independence should be reinforced rather than weakened.

1. A hinge moment and the AI questions

Speaking at Jackson Hole on his hundredth day as Fed Chairman, Kevin Warsh said the landscape has shifted from the era of secular stagnation and saving glut to a possible growth surge driven by AI, with capital pouring into AI infrastructure and token sales at the two leading labs reportedly above 100 billion dollars annualised, up over 500% in a year. He framed AI as possibly a new factor of production and listed open questions: whether productivity will rise durably and when; whether AI complements or competes with labour; whether future models will need more or less capital; who captures the surplus (labs, chipmakers, energy and cloud firms, or later businesses and consumers); and how tokens will be priced. A dedicated internal group on productivity and employment will examine this, but its findings will come later and will not shape current decisions. He believes the public and markets understand that changes in how the Fed conducts policy will serve both stable prices and a strong job market.

2. Rethinking forward guidance

He argued that forward guidance, adopted during the 2008 crisis, has outstayed its welcome: in normal times it should be limited, because oversharing and overcommitting create ambiguity and constrain the Fed's own freedom to decide. The Fed should read markets' unfiltered signals (asset prices, Treasuries, the dollar, credit costs, commodities), while market participants should form their own views rather than relying chiefly on the Fed to decide what to buy or sell next. If markets lean on the Fed and the Fed leans on market prices, a hall of mirrors results, and the heaviest cost falls on people without financial assets, who bear the effects of wrong inflation or jobs calls. Publishing a mechanical reaction function is not the answer either, because economic knowledge is not precise enough; he noted that guidance in 2021 may have delayed the response to inflation, and promised more reliable models and rules, with humility about forecasting.

3. Seven principles

Trends, not isolated data points, matter most, since the Fed must choose amid uncertainty using information that is relevant, current and actionable. Seven principles guide him: separate today's reality from stale data and focus on trends; recognise that supply can only be inferred, so judging its balance with demand is imprecise; treat the 2% PCE target as firm, noting that stable prices do not arrive on their own and inflation does not necessarily revert by itself; see the dual mandate as complementary, since high inflation harms prosperity; rely mainly on short-term interest rates and use unconventional tools sparingly outside genuine crises; remember that money, including bank-created money, still matters; and prefer a quieter, more purposeful Fed judged on results.

4. A stronger economy

He sees an economy that has strengthened. Business investment in equipment and intangibles is up around 9% over four quarters, with more than half of the capital-spending growth tied to the AI buildout; S&P 500 profits are up over 20%; credit spreads are tight and bank lending standards easy, so financial conditions are hardly restrictive, though housing and agriculture show strain. Real consumer spending rose over 2% and private domestic final purchases nearly 3%. Unemployment is 4.1% and jobless claims are near multi-decade lows, consistent with full employment. He added that expectations for capital spending and earnings growth are high, so he will watch the change in those growth rates, and that bank surveys show easier standards for commercial loans.

5. Inflation is the concern

Inflation is the worry: PCE is up 3.7% over twelve months and 4.1% over six, and 54% of PCE components rose above 3% against 32% in the two pre-pandemic decades. Wages are not a reliable guide, medium-term expectations look anchored, and he stressed that responsibility for 65 months of elevated inflation lies with the central bank. The Fed should be confident that underlying inflation is heading to target clearly and quickly; otherwise there is work to do. To gauge the underlying trend he splits the PCE index into its 199 components; summer readings were better than expected but do not prove a lasting improvement, and market measures of expectations, he warned, look durable until the moment they are not. He closed by pledging adherence to principles rather than to any particular rate move.

1. The Gelam tree and renewal

Speaking at the Sasana Symposium on the theme of reforms for resilience, Governor Abdul Rasheed Ghaffour likened structural reform to the Gelam tree, which thrives in harsh conditions by shedding bark and renewing itself. Monetary policy is an important defence and the current stance fits the growth and inflation outlook, but as a demand tool it cannot fix underlying weaknesses; reforms invest in the economy's future, raising productivity, competitiveness and staying power. Malaysia reformed after the Asian crisis, again when investment slowed in the mid-2010s, and after the pandemic; the central bank's part is preserving macroeconomic stability so reforms can take hold, through steady prices, a healthy banking system and well-functioning markets, and it will keep doing so. The medium-term outlook stays favourable, with firm growth and manageable inflation.

2. Productive capacity and public finances

The latest reform phase has two pillars. On investment, the aim is not simply more but the right kind, bringing technology, better jobs and greater value; Malaysia approved 815 billion ringgit over two years, almost half of GDP, mostly in advanced manufacturing, semiconductors and digital technology. On fiscal capacity, phased-in targeted diesel subsidies, subsidy reforms, tax adjustments and a fiscal responsibility law cut the deficit from 6.2% of GDP in 2020 to 3.7% in 2025. Growth was 5.2% last year, the ringgit led regional currencies, and 4-5% growth, toward the upper end, is expected this year despite the energy shock. None of this happened by chance, he stressed: difficult choices were made early and in sequence. A 1.5 billion dollar global sukuk drew nearly five times the amount offered, at record-low spreads.

3. Where to go: jobs, skills and wages

He set out anchors for the next stage. First, make growth felt at home through better jobs: high-skilled employment rose from 27.5% to 30.1% of the total between 2019 and 2025, and the investment pipeline could create about 245 000 jobs, many of them higher skilled, yet over two thirds of workers hold low or mid-skilled roles. That calls for continuous upskilling, digital fluency, vocational training and STEM and AI education under the 13th Malaysia Plan, plus wages that reward productivity, minimum wage increases as a floor, and a more coherent social protection system that tackles the roots of vulnerability.

4. Value creation and a better financial sector

Second, move from extracting value to creating and retaining it: investment should leave behind stronger local firms, skills and technology diffusion, through research, design, engineering and programmes such as SemiconStart, and growth must stay sustainable given the country's rich biodiversity. Third, everyone has a role: the upcoming Financial Sector Blueprint 2027-2030 aims for finance that builds resilience to climate shocks, supports prosperity by channelling capital to productive firms, with Islamic finance as a force for change, and is future-proofed through proportionate regulation that does not curb innovation.

5. Co-creation and closing

The central bank is moving towards co-creation with banks, businesses and technology players, through platforms such as the climate change joint committee, the regulatory sandbox and iTEKAD, which will launch an employment initiative. Countries should stay ahead of the curve instead of solving yesterday's problems. Closing on Gelam bark that let Malay ships flex with the waves, he said resilience means adapting without losing one's bearings, and the task now is to turn stronger foundations into stronger incomes, investment into opportunity and resilience into progress that many people share.

1. Outlook after the Middle East war

Christine Lagarde told the European Parliament's economic committee that the euro area was gaining traction, with first-quarter growth of 0.3%, just before the Middle Eastern conflict erupted. The war now weighs on activity, especially services, while manufacturing has held up on stock building and defence spending. June staff projections have growth rising from 0.8% this year to 1.2% next year and 1.5% after that, with weaker domestic demand but solid household balance sheets. Inflation rose to 3.2% in May, driven by energy inflation above 10%, with core inflation at 2.6%. Short-term expectations have jumped but longer-term measures remain near 2%. Projections have inflation averaging 3.0% this year, easing to 2.3% then returning to 2.0% by 2028, with upside risks to prices and downside risks to growth, and the peace agreement remains fragile.

2. The June rate rise

The ECB raised its three key rates by 25 basis points in June, a decision that holds in every staff scenario. It will stay data-dependent and move meeting by meeting, basing choices on the inflation outlook and risks, underlying inflation and the strength of transmission, without pre-committing to a path.

3. How the strategy handles supply shocks

She explained that the 2025 strategy review rests on three principles. First, assess the shock: monetary policy cannot cut energy prices but must judge spillovers to other prices and wages; larger, more persistent shocks have non-linear effects, and strong demand or tight labour markets make pass-through easier. This shock looks smaller than the last episode, and starts from a different context, with inflation near target and policy no longer highly accommodative, though price and wage setting may now be more sensitive. Second, look at risks around the baseline, using scenarios, since big shocks can cause disproportionate deviations. Third, tailor the response: look through small, temporary shocks, make a measured adjustment for a sizeable but short-lived overshoot, and respond forcefully or persistently if inflation would deviate significantly and for long. The ECB is in the middle case, with no evidence yet of de-anchored expectations or second-round effects. She added that monetary policy cannot offset such shocks fully, so energy resilience matters, and thanked the committee for progress on the digital euro legislation.

1. Thanks and strategic direction

Closing the bank's annual meetings in Brazzaville, President Sidi Ould Tah thanked the Congo's president and people for the welcome and praised the presidential dialogue as a political highlight. He said the strong support received for his reform agenda is now the compass of his mandate, that results exceeded expectations, and that the week set in motion dynamics of action, transformation and integration, with Africa at a turning point and the free trade area as its macroeconomic instrument.

2. Concrete results

He saluted the Congolese president's decision to lift visa requirements for all Africans from 1 January 2027 as a step moving integration from words to reality. A session on the Congo Basin's blue fund drew nearly three billion dollars in pledges, a historic first, for 17 countries. A meeting with civil society, philanthropists and the diaspora stressed women's empowerment, youth jobs, support for small firms and universal access to basic services. Angola confirmed 6.5 million euros for the seventeenth African Development Fund, bringing African contributors to 25 and over 190 million dollars. Quoting a Congolese poet, he said the continent's question mark is becoming an exclamation mark of ambition, confidence and action.