Singapore tightens policy to curb rising inflation
By CentralBankNews.info
Singapore’s central bank tightened its monetary policy by increasing “slightly” the appreciation slope of the Singapore dollar from zero percent in light of rising inflation due to an improving labour market as the island state’s economy is likely to continue on its steady expansion path in 2018. The Monetary Authority of Singapore (MAS), which targets the value of the Singapore dollar against a basket of currencies as a way to control inflation, added the width of the policy band and the level of which it is centered will remain unchanged. “This policy stance is consistent with a modest and gradual appreciation path of the S$NEER (S$ Nominal Effective Exchange Rate) policy band that will ensure medium-term price stability,” MAS said. MAS had kept the appreciation rate of the Singapore dollar against an undisclosed basket of currencies at zero percent since April 2016 and the last time it increased the slope of the appreciation was in April 2012. But in its previous policy review from October 2017, MAS dropped the reference to maintaining the neutral stance for an “extended period, ” signaling it was ready to tighten its policy. Singapore’s economy grew by an annual rate of 4.3 percent in the first quarter of this year, according to advance estimates by the trade and industry ministry, up from 3.6 percent in the full 2017 year. Barring a setback in global trade, MAS expects Singapore’s economy to continue expanding in coming quarters with growth slightly above the middle of its forecast range of 1.5-3.5 percent. However, MAS was also clearly concerned that rising trade tensions between the United States and China could impact global trade, and said its “measured adjustment” to its policy stance took into account the uncertainty presented by the ongoing trade tensions. Singapore’s headline inflation rate rose to 0.5 percent in February from zero percent in January while MAS core inflation, which excludes private road and accommodation costs, rose to an average of 1.6 percent in January-February from 1.4 percent in the fourth quarter of last year. In coming quarters, MAS expects imported inflation to rise mildly due to rising global demand with oil prices rising moderately as compared with 2017. “Should economic conditions evolve as expected MAS Core inflation will rise gradually over the course of this year. For 2018 core inflation should come within the upper half of the 1-2% forecast range, ” MAS said.
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