The tight monetary policy stance coupled with the macroprudential measures continues to improve the core inflation trend (Chart 11). As of the end of 2014, the core inflation trend has receded to 5 percent. The leading recent development, which affected inflation dynamics at most, has been the plunge in oil prices (Chart 12). Amid this decline, annual inflation in the energy group fell remarkably and stood below zero at the year-end. Favorable cost developments driven by plummeting oil prices also contribute to the improvement in the core inflation trend. Briefly, the last quarter of the year was marked by evident effects of the falling oil prices on inflation. A remarkable improvement was witnessed in inflation expectations after a long period and the positive effect of oil prices on the headline inflation spilled over into many subgroups, chiefly the services group. Besides the international price developments that contribute to falling inflation, we envisage that the gradual elimination of cumulative exchange rate effects, the decline in food inflation to past years’ averages and our tight monetary policy stance will support the disinflation process in the upcoming period. Against this background, we project that consumer inflation will register a notable improvement particularly in the first quarter, and inflation will recede to levels consistent with the target in mid-2015. Now, I would like to give a brief account of developments in economic activity and the shortterm outlook on which the inflation forecasts are based.

This builds on existing cooperation areas under the first OCBC-Bank of Shanghai MOU such as cross-border trade finance, investment banking and treasury solutions. Capital Market Connectivity and RMB Internationalisation 7 Second, expanding the suite of offshore RMB financial products and facilitating more  investments into China’s capital markets through collaboration between Shanghai and Singapore financial institutions. This would be aligned with China’s goals to open up its capital markets and promote RMB internationalisation. a . China Foreign Exchange Trade System (“CFETS”), Bank of China (“BOC”), and  Singapore Exchange (“SGX”) signed a strategic cooperation agreement in November this year to jointly promote the CFETS-BOC Traded Bond Index and its sub-indices to international investors3. SGX will be the first exchange to distribute the CFETS-BOC Traded Bond Indices outside of China. The launch of the Bond Indices will catalyse the development of tradable China bond products and facilitate greater investments into China’s bond market by international investors. This will enhance the development of China’s bond market, as well as strengthen Singapore’s role as a Global-Asia gateway for asset managers and investors. Mutual Establishment of Financial Institutions from Shanghai and Singapore  Third, we welcome more progress in mutual establishment of financial institutions from both cities. Shanghai and Singapore financial institutions are ramping up their presence in 8  Singapore and Shanghai respectively, reflecting strong confidence from the financial industry and the growing business opportunities available in both cities. a .