First, the slower pace of GDP this year is expected to close the positive output gap. In recent years, GDP was growing faster than potential. Second, the fall in global oil prices in Q4 2018 and the deregulation of the electricity distribution market have exerted a dampening effect on inflation. Third, the two rounds of monetary policy tightening last year by MAS will continue to have a restraining effect on inflation. CPI-All Items inflation for the year is projected to be between 0.5 and 1.5%. Private road transport costs could pick up slightly from 2018 with higher car prices more than offsetting lower petrol prices. Accommodation costs are likely to decline, but at a slower pace this year. Overall inflation in Singapore remains well below the historical average. MAS’ monetary policy stance remains appropriate against the backdrop of subdued inflation and weakening growth prospects. Last year, MAS began the process of monetary policy normalisation by exiting from the zero percent appreciation path of the nominal effective exchange rate $ policy band. MAS increased slightly the slope of the policy band in April 2018 and again in October 2018, against the backdrop of healthy economic growth and gradually rising inflation. In April this year, with inflationary pressures stabilising and the output gap beginning to narrow, MAS kept the policy stance unchanged. Our current stance of a modest and gradual appreciation path of the $ policy band will help to keep the economy close to potential and ensure medium-term price stability.
Trichet: What we must achieve first, are sound and rigorously implemented adjustment programmes fully in line with the commitment of Governments to take all measures needed  BIS Review 67/2010  1  to meet their fiscal targets this year and the years ahead in line with excessive deficit procedures and to accelerate fiscal consolidation and ensure the sustainability of their public finances. HB: Do you see any risks for European taxpayers? Trichet: Our message from the very outset has been that risks for European taxpayers will not materialise if all governments concerned are faithful to all their commitments. They must keep to the rules and commitments. They must behave themselves properly and alert their peers, the other Governments, to also behave properly. Mutual surveillance is essential. HB: Do you now start the same what the central banks in the United States and the United Kingdom have already been doing for a while? Trichet: That is not comparable. What the Federal Reserve and the Bank of England have done was “quantitative easing”. They were injecting liquidity into the markets and that with the explicit goal of augmenting the overall liquidity. As I said already what we are doing through the Securities Market Programme is not quantitative easing. HB: Is the ECB violating the spirit of the Treaty of Maastricht? Trichet: No, not at all. We cannot imagine doing anything that would violate the Treaty – not even for a moment. What we are doing is of course in conformity with the Treaty’s letter.