Monetary policy ought to react ?decisively' to short-term inflation driven by strong demand, but should aim to restrain ? to quash ? price pressures which stem from long-term supply constraints. The challenge for the central bank is to distinguish between the demand and supply drivers of inflation, while staying ?vigilant' to the risks of spiraling inflation expectations, said Ong Chong Tee, Deputy MD of MAS. These were the considerations behind MAS' April move to tighten monetary policy, he told about 200 academics and finance professionals at a conference yesterday, held by SMU's Sim Kee Boon Institute for Financial Economics.
The Business Times