What happen when you have Deflation.

[Arcachon]

http://www.tradingeconomics.com/singapore/inflation-cpi

Singapore annual consumer prices decreased by 0.2 percent in December of 2014, following a 0.3 percent drop in the previous month. It is the second consecutive decline since November 2009, as cost of transport, housing and clothing and footwear declined.

[indomie]

Continous deflation is bad for the gov because they will get less money from taxes. As for the consumers, it will discourage spending.

[Arcachon]

So you should increase interest rate to encourage spending or reduce interest rate.

[pmet]

So you should increase interest rate to encourage spending or reduce interest rate.

... you should decrease interest rates to recover. However, SG doesn't set their own interest rates. The decline in inflation is no coincidence. Since QE ended last year, effective interest rates have been going up and we're seeing the effect on a declining inflation rate (see that chart you posted). In the past when QE was going at full speed, so was SG's inflation rate. Now's just the reverse with QE's death plus the interest rates hike.

Europe's QE is different as it neither affects our SIBOR nor SOR. Don't bank on EU :P

[Arcachon]

So during AFC in 1997, what the west say we do and now SG doesn't set their own interest rate we also follow ??????

[Kelonguni]

One man's meat is often another's poison. The trick is to recognise whether it's meat or poison.