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OUR MISSION
OUR OBJECTIVES
 
ECONOMIC DEVELOPMENTS AND
MONETARY POLICY
D ECONOMIC DEVELOPMENTS AND MONETARY POLICY  
 
The World Economy: Robust Growth on  
the Strenght of the US Economy  
70
 
International Financial Markets: Resilience  
in the Face of Uncertainties
71
 
Singapore Financial System
 
Remains Sound  
74
 
Singapore Economy: Ending on a High Note  
74
 
Monetary Policy Amid Continued Growth  
and Emerging Inflationary Pressures  
77
 
Strengthening the Monetary Policy
 
Formulation Process  
77
 
Pushing the Frontier of Monetary Policy
 
Research and Analysis  
78
 
Box 16 – Assessing Market Response to  
MAS’ Monetary Policy  
79
 
  SINGAPORE FINANCIAL SYSTEM REMAINS SOUND
 

While the sell-off in global equity markets in May 2006 and the recent volatility in foreign exchange markets suggest some nervousness in international financial markets following a strong run-up in asset prices, the conditions underpinning Singapore financial system stability remain firmly intact. MAS conducts a regular assessment of Singapore’s financial system by identifying potential sources of risks and vulnerabilities, and assesses the ability of the financial system to withstand these potential shocks. The results of the analysis are contained in the Financial Stability Review (FSR). In MAS’ assessment, the Singapore financial system remains sound, supported by healthy financial positions of the corporate and household sectors. Firms’ profitability and other financial indicators have continued to improve, while household wealth has strengthened further.

The strong financial performance of Singapore banks has also allowed them to build up significant financial buffers to absorb potential shocks arising from the tightening of financial conditions and a sharp contraction in economic growth. To assess the resilience of the Singapore banking system, stress tests were conducted on scenarios of a significant downturn in the global economy and decline in asset prices. The stress test results showed that banks in Singapore would be resilient to shocks under these scenarios.