Core inflation is now around 1.5% at mid-year and we expect it to rise further, approaching 2% by year-end as the labour market continues to tighten. Monetary policy is predicated on baseline projections of growth and inflation. It does not aim to pre-empt tail risk scenarios. While we are closely monitoring the global risk factors mentioned earlier, our baseline forecast is for continued economic expansion and gradually rising inflation. The threat of a disruptive trade war has risen, but remains a tail risk for now. Our approach therefore has been to begin monetary policy normalisation but to do so in an incremental fashion in view of still-benign inflation and growing trade-related tail risks. In the short term, the policy band provides sufficient room for the $ nominal effective exchange rate to accommodate modest shocks to the Singapore economy. Future adjustments to monetary policy will depend on how the economy evolves and our updated assessments of inflation and growth prospects. PROPERTY MARKET AND MACROPRUDENTIAL POLICY The Singapore property market has seen a resurgence in prices and transactions over the past year. Prices of private housing have increased 9.1% since the trough in Q2 2017. This has mostly offset the cumulative price decline of 11.6% during the four-year period between mid2013 and mid-2017. The number of property transactions over the last 12 months was around 25% higher than during the previous 12 months. New housing loans over the last twelve months have risen by 34% year-on-year.
That said, I do not wish to suggest that CCM has an adequate regulatory profile, since from a prudential standpoint it does not meet the minimum regulatory capital requirements. Allow me to clarify this point further. As you know, Spanish solvency law (which adopts the EU rules known as Basel II) requires credit institutions to observe a minimum capital ratio of 8% of their risk-adjusted assets. The institution, with a level below 8%, does not currently meet this requirement. However, this does not mean that it is insolvent or that its net assets are insufficient to meet its liabilities. Part of this non-compliance with the capital ratio is due to the growing provisions for loan impairment and to the large losses on its portfolio of corporate holdings and financial investments, which had a negative impact on its income statement. The analysis currently being completed by the Supervisor and CCM’s external auditors, which is based on data relating to end-2008, allows us to predict that CCM will post a significant loss in its consolidated financial statements for 2008. This changes the projections issued by its former directors. Indeed, the former directors should have submitted the final accounts for 2008 at the board meeting scheduled for Tuesday, 31 March. The replacement by the Banco de España of the board of directors the previous weekend caused that submission to be postponed while the new provisional central bank appointees receive the latest reports from the audit firm and the Supervisor.