This has reduced business cost pressures and thus overall inflation. Third, the tighter monetary policy stance has nudged the level of output closer to its potential, thus preventing the economy from overheating. The positive output gap is projected to narrow from nearly 4% of potential GDP in 2010 to around 1% this year. MAS’ policy stance has begun to yield results. Both CPI-All Items inflation and MAS Core Inflation have eased from their recent peaks. •  CPI-All Items inflation has fallen from 5.5% in Q3 2011 to 4.0% in Q1 2013. •  At 1.6% in the first quarter of this year, MAS Core Inflation is running at nearly half the pace seen a year ago. BIS central bankers’ speeches  5  But there is no room for complacency. The pace at which business costs are passed through to consumer prices could pick up in the latter half of this year. MAS will remain vigilant in ensuring that the recent gains in controlling inflation are sustained. Macroprudential policies: augmenting monetary policy to promote economic and financial stability Let me move on now to macroprudential policy. This is the new buzzword in central banking circles. It has not been much referred to in Singapore, but we have been applying macroprudential policies for some time now. I will describe now the workings of macroprudential policies in Singapore, explaining why they are necessary in our context, and how they have been applied.
Ravi Menon: Securing price stability as Singapore restructures Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Asian Bureau of Financial and Economics Research (ABFER) Opening Gala Dinner, Singapore, 21 May 2013. *  *  *  Professor Bernard Yeung, Dean, NUS Business School, whose tireless efforts have brought to fruition the Asian Bureau of Financial and Economics Research, distinguished guests, ladies and gentlemen, good evening. Interesting times again Monetary policy has become interesting again. The Great Moderation, beginning in the mid-1980s and spanning two decades, marked the triumph of monetary policy over the scourge of inflation. The formula worked brilliantly – independent central banks, with clear mandates to pursue price stability, and doing so with consistency and credibility, ushered in an era of macroeconomic and financial stability supporting steady economic growth and rising prosperity. Then came 2008/2009 – unleashing a financial crisis of unmatched scale and impact, and a global recession deeper than any seen since the Great Depression. We are still living in the shadows of these two shocks, with the global economy stuck in a hesitant and uneven recovery and financial market stresses resurfacing from time to time. Monetary policy in the advanced economies has entered unchartered waters, in a valiant effort to support economic growth, which was being weighed down by deleveraging. In the emerging economies, central banks and governments have had to be equally nimble in their policy responses, as they grapple with the spillover effects of these unconventional monetary policies.