−0. 9 % in the first five months of this year, as a result of declines in housing rentals and car prices. headline inflation has been negative for quite some time, but could turn positive towards the later part of this year, barring large shocks to global oil prices or an unexpected decline in coe premiums. our forecast for 2016 remains unchanged for cpi - all items inflation at −1. 0 to 0 %. headline inflation is expected to converge towards its historical average over the next couple of years. monetary policy the progressive easing of monetary policy since january last year has been in line with weak underlying inflationary pressures. mas has taken measured steps to reduce the slope of the nominal effective exchange rate band over the past 18 months. this has been validated by accumulating evidence of weakening inflationary pressures. in april 2016, mas moved to a zero percent rate of appreciation for the singapore dollar nominal effective exchange rate policy band. the current stance of monetary policy remains appropriate for overall macroeconomic conditions in 2016. mas is monitoring global developments closely. unless there is a marked deterioration in the global economy or significant shift to the inflation outlook, there is no need to change the monetary policy stance. the current stance will help ensure price stability in the medium term. notwithstanding recent volatility in exchange rates, the nominal effective exchange rate of the singapore dollar remains within the policy band. mas ’ exchange rate policy framework is sufficiently flexible to accommodate such heightened volatility in international financial markets. mas stands ready to curb excessive volatility in the trade - weighted singapore dollar. macroprudential policy – car loans and property loans while monetary policy is focused on overall price stability, macroprudential policies target specific areas to promote economic and financial stability. the two key macroprudential measures taken in recent years relate to the property market and car market. in the property market, mas has implemented prudential limits on loan - to - value, loan tenure, and debt service ratios while the ministry of finance has implemented stamp duties on buyers and sellers. this collection of measures is the so - called property cooling measures. in the car market, mas has implemented limits on loan - to - value and loan tenure. mas eased the limits on car financing in may this year. but it is not time yet to ease the property cooling measures. the considerations and circumstances in the two markets are quite different. the restrictions on car financing were imposed in 2013 – at a stringent level – primarily to

also been working to estimate the implications of a wider variety of interest rate shocks. our analysis to this point ( undertaken outside of our annual stress test program ) suggests that banking firms are capitalized to withstand the losses in asset valuations that would arise from large spikes in rates, which, moreover, would see an offset from the increase in the value of bank deposit franchises. this finding is consistent with the lack of widespread stress during the period of may through june 2013 when interest rates increased considerably. 7 the next set of stresstest results, which we will release next month, will provide further insight on this point, both to regulators and to markets. while ad hoc supervisory action aimed at specific lending or risks is surely a useful tool, it has its limitations. first, it is a bit too soon to judge precisely how effective these supervisory actions – such as last year ’ s leveraged lending guidance – have been. second, even if they prove effective in containing discrete excesses, it is not clear that the somewhat deliberate supervisory process would be adequate to deal with a more pervasive reach for yield affecting many areas of credit extension. third, and perhaps most important, the extent to which supervisory practice can either lean against the wind or increase the overall resiliency of the financial system is limited by the fact that it applies only to prudentially regulated firms. this circumstance creates an incentive for intermediation activities to migrate outside of the regulated sector. should this shift occur in significant ways, the financial system could ultimately be exposed again to the very risks against which much post - crisis regulatory reform has been directed. to be sure, it is not a trivial task for unregulated financial - sector participants to move into activities in which regulated institutions have traditionally operated. but if the potential gains were high enough, unregulated actors could have sufficient incentive to do so. indeed, it must be recognized that regular recourse to supervisory measures in response to nascent financial stability concerns would likely be perceived as increasing the payoff from this form of regulatory arbitrage. the limitations of supervision as a tool for managing the risks to financial stability that could arise from protracted periods of low interest rates have intensified interest in time - varying macroprudential policies – that is, measures that can be calibrated to changing economic or financial conditions. the appeal of such requirements is that they could, at least in principle, be adopted reasonably quickly as risks increased, implemented in a straightforward way,