Economic activity in Singapore in 2013 saw sustained albeit uneven growth as the year progressed, underpinned by a mild recovery in the G3. The trade-related activities improved, while financial services rebounded on the back of robust lending. Domestic-driven sectors, such as construction and other services, were broadly resilient. Overall job creation was strong, while the supply of labour was constrained by tighter foreign worker policies. Accordingly, the economy remained at full employment and wage pressures picked up.

Against this backdrop, MAS kept the slope of the S$ nominal effective exchange rate (S$NEER) policy band on a modest and gradual appreciation path in April and October 2013. Despite near- term uncertainties in the emerging economies, the Singapore economy is projected to grow at a moderate pace in 2014. The labour market will likely remain tight and MAS Core Inflation should stay elevated as firms pass on accumulated costs to consumer prices. MAS therefore maintained the policy stance in April 2014 to keep inflationary pressures contained.

Monetary policy in Singapore is formulated with the objective of promoting price stability over the medium term as the basis for sustainable economic growth. Chart 3 traces the evolution of monetary policy against the backdrop of changes in key macroeconomic variables. MAS has maintained a modest and gradual appreciation path for the S$NEER policy band since April 2010, which has restrained but not fully offset temporary inflationary pressures from economic restructuring.