Over the past few months, CPI accommodation costs were boosted by an unexpected surge in the number of tenancy contract renewals at current higher rental rates. This resetting of old rental contracts could persist into the second half of this year. We therefore expect accommodation costs to impact CPI inflation more strongly than previously. Second, private transport costs. COE premiums have risen faster than expected, reflecting rising incomes and sharp cuts in COE quota to its lowest in more than a decade. This uptick in headline inflation should be seen in perspective. A better measure of underlying price pressures in economy is MAS’ measure of core inflation. Core inflation excludes private road transport and accommodation costs, as these items are subject to short-term fluctuations. These items also do not affect the day-to-day outlay of most Singaporean households. Core inflation is the measure MAS monitors most closely, among a range of indicators. Compared to headline inflation, core inflation was much lower at 2.2% in April and May. This reflects in part MAS’ pre-emptive tightening of monetary policy in April and October last year, which has helped to dampen some cost increases. A stronger Sing Dollar has helped, not just by filtering oil and food price increases, but also by providing a restraining effect on the economy. The strong exchange rate has capped upward pressure on prices. For the whole of 2011, the projection for MAS’ core inflation remains unchanged at 2–3%. This is not to suggest we are entirely satisfied with the inflation situation.

We are looking to issue more and in longer tenor, in the future. As for the MAS Standing Facility, we have, in the last two years, progressively expanded the range of eligible collateral. MAS has signed cross-border collateral arrangements with other central banks. Banks can now use as collateral, Euro and Sterling cash, as well as French, German and British government securities. We are now finalising similar arrangements with the US Federal Reserve, so that banks will be able to pledge US Treasury bills and notes to obtain Singapore dollar liquidity at the Standing Facility. These initiatives significantly enhance banks’ flexibility to tap on global sources of liquid assets. Let me now touch on the regulation of financial markets. A key focus of international regulatory reforms has been on the trading of OTC derivative contracts. MAS will meet objectives set by G20 Leaders on regulation of OTC derivatives as well as recommendations by the Financial Stability Board (FSB). We are now reviewing our detailed policies and will conduct consultation by the end of this year on all aspects of FSB’s recommendations. MAS aims to meet FSB target to implement the recommendations by end 2012. There are four key thrusts in FSB’s recommendations on OTC derivatives trading. First, standardise derivative contracts. MAS is working with Singapore Foreign Exchange Markets Committee (SFEMC) to encourage further standardisation of derivative products. The SFEMC will formulate a code of conduct for financial institutions operating in the OTC market. Second, mandate central clearing of all standardised contracts.