Image: Reuters Berita 24 English - In an off-cycle move on Thursday, Singapore's central bank tightened monetary policy, claiming that t...
 |
| Image: Reuters |
Berita 24 English - In an off-cycle move on Thursday, Singapore's central bank tightened monetary policy, claiming that the move would decrease inflation as the city-state joins other nations in stepping up their fight against rising price pressures.
Following the news, the Singapore dollar increased significantly and was last up nearly 0.7 percent to S$1.3963 per dollar.
Singapore's tightening was the fourth in the previous nine months, with interest rates recently rising at central banks from New Zealand to Canada in an effort to contain skyrocketing consumer costs.
"It is obvious that MAS is quite worried about inflation. Simply put, they're going to try their hardest to stop inflation "said Chua Hak Bin, a Maybank economist.
The Nominal Effective Exchange Rate, or S$NEER, the midpoint of the exchange rate policy band, will be recentered, according to the Monetary Authority of Singapore (MAS). The slope and width of the band won't vary, it stated.
The MAS stated in a statement that "this policy step, building on earlier tightening moves, should help reduce the speed of inflation and ensure medium-term price stability."
After a sombre inflation data showed inflation soaring to four-decade highs, the U.S. Federal Reserve is expected to intensify its monetary tightening drive with a supersized 100 basis point rate increase this month.
Singapore's central bank tightened monetary policy in April to combat rising prices caused worse by the conflict in the Ukraine and supply disruptions around the world.
In April and October of each year, the central bank typically holds its two regular monetary policy meetings.
The most recent action, which follows an unannounced tightening in January, is the second out-of-cycle shift this year and opens the door to more rate increases, according to economists.
According to Moh Siong Sim, a strategist at the Bank of Singapore, "it's telling you that we are worried about inflation and thus we prefer a strong currency."
"Regarding the timing and size of the move, it was probably not entirely anticipated. How much more tightening is yet to come? is left unclear."
Because trade flows dwarf its economy, the MAS controls monetary policy through exchange rate settings rather than interest rates.
Three levers are used to change the policy: the slope, mid-point, and width of the policy band. These three variables allow the Singapore dollar to move up or down against the currencies of its primary trading partners within an undefined band.
The central bank's prediction that Singapore's GDP growth rate will be in the lower part of the predicted range of 3-5 percent for 2022 and an increase in core inflation to 3.0-4.0 percent for the year from 2.5-3.5 percent prompted the adjustment in policy.
