In 2015, GDP growth in the Singapore economy slowed to 2.0% from 3.3% in 2014. CPI-All Items inflation turned negative and MAS Core Inflation moderated to 0.5% from 1.9% in the previous year. The decline in core inflation was due to the disinflationary effects of lower oil prices, as well as budgetary and other one-off measures.

Singapore's monetary policy was eased in a calibrated manner, in line with the changing macroeconomic environment. Having already reduced the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band in an off-cycle move in January 2015, MAS maintained the policy stance in April last year. In October 2015, MAS eased policy further by reducing the rate of appreciation of the policy band slightly, in view of reduced price pressures alongside a weaker growth outlook.

Going into 2016, MAS assessed that the tightness in the labour market had eased, and MAS Core Inflation was expected to pick up more gradually than earlier anticipated. At the same time, core inflation was likely to average below 2.0% over the medium term. Singapore's GDP growth outlook had also moderated against a less favourable external environment. Accordingly, in April 2016, MAS set the rate of appreciation of the S$NEER policy band at zero percent. There was no change to the width of the band and the level at which it was centred. This was not a policy to depreciate the domestic currency, but a measured adjustment following the policy easing undertaken last year, and will ensure price stability over the medium term. Chart 3 traces the evolution of monetary policy against the backdrop of changes in key macroeconomic variables in recent years.