Singapore’s central bank has tightened its monetary policy for the third time this year to avoid inflationary pressures becoming more persistent.
The Monetary Authority of Singapore (MAS) on Thursday decided to re-centre the mid-point of the Singapore Dollar Nominal Effective Exchange Rate policy band up to its prevailing level. There will be no change to the slope and width of the band.
According to the bank, the policy move, building on previous tightening moves, should help slow the momentum of inflation and ensure medium-term price stability.
The Central bank holds its monetary policy meetings in April and October.
However, this year, other than Thursday’s unscheduled policy tightening, the bank resorted to another out-of-cycle move in January.
The MAS applies the exchange rate against a basket of currencies within an undisclosed band as its monetary policy tool.
The central bank raised its core inflation forecast for this year to 3-4 per cent, up from a previous 2.5-3.5 per cent.
Overall inflation was expected to come in at 5-6 per cent, higher than the earlier forecast range of 4.5-5.5 per cent.
Although core inflation was projected to rise above 4 per cent, it was forecast to ease in the fourth quarter of 2022. Still there was considerable uncertainty over the extent of the decline.
Overall economic growth projected to come in at the lower half of the 3-5% forecast range for 2022 as a whole.
Looking ahead, growth was expected to moderate further in 2023.
However, data released earlier by the Ministry of Trade and Industry showed that GDP was unchanged on a sequential basis in the second quarter, after posting an expansion of 0.9 per cent in the first quarter.
Economists at Capital Economics further said while economic output was set to start rising again during the second half of the year, growth was likely to be weak as cooling global demand and higher interest rates drag on activity.
