The relevant question is whether the global factors currently pushing up on goods prices are still there by the time a policy decision taken today could have any significant effect of its own. What is their prospective contribution to inflation in eighteen, twenty-four months and beyond? This is the horizon that matters for policy and against which the word “transitory” should be measured. As I outlined earlier, one key contributor to the big acceleration in traded goods prices has been the  Chart 7. Switch from services to goods has been a global phenomenon. Services consumption started recovering with the lifting of restrictions  big shift in consumer spending, across the  Durable Goods  developed world, away from services and towards  Level, 2019Q4 = 100 125  Other goods  120  Services  115  goods. Unable to spend anything like as much on consumer services during the pandemic –  110  restaurants, leisure and transport, for example –  105  consumers didn’t save all the proceeds; they  100  shifted quite a bit of them to goods. This was  95  already evident as early as the start of this year. In  90  the UK, for example, retail sales grew pretty  85  strongly through 2020, even as spending on services collapsed (if you can’t go to the cinema, why not spend those savings on a new TV?).
Some $ billion or more could flow into regional markets to tap diversification benefits. This presents an opportunity for the asset management companies and capital markets industries here to develop investment funds and structured products, including Islamic financial products, to manage a portion of this wealth. Maintaining excellence in a riskier environment Our second priority is maintaining excellence in our core central banking functions in a riskier environment. In recent years, the external environment has become more volatile and complex. At the same time, our economy has been undergoing significant structural adjustments. We must ensure that the formulation and conduct of monetary policy continue to be robust and flexible. We will further strengthen our monetary policy formulation process by enhancing our forecasting, surveillance and research capabilities. We intend to reinforce our macro-econometric model by introducing new features that will enable us to better assess the impact of risks on key sectors and relationships in the economy. In the area of surveillance, we have started an intensive industry consultation process as part of our exchange rate policy review. We will continue to fine-tune this process. To enhance our understanding of the economy, we are constructing a flow-of-funds framework to get a better understanding of financial flows across different sectors of the economy. Changes and increased volatility in financial markets also pose challenges for the implementation of monetary policy. Singapore dollar capital markets have grown enormously over the last five years. Foreign participation has gone up.