SINGAPORE — Singapore’s central bank tightened its monetary policy for the third time in recent months to slow inflation and help ensure medium-term price stability.
The Monetary Authority of Singapore on Thursday said it will recenter the midpoint of the Singapore dollar’s policy band and slightly increase its rate of appreciation. It did not make any change to the width of the policy band.
“With the labour market remaining tight and higher global inflation passing through to domestic costs, core inflation will see a broad-based step up in 2022 and risks remaining elevated over the medium term,” the MAS said in the statement. “Underlying inflation pressures remain a risk over the medium term.”
In late January, the MAS unexpectedly tightened its monetary policy by slightly raising the rate of appreciation of the policy band while keeping the width of the band and the level at which it is centered unchanged. In October, the MAS had slightly raised the band’s slope from zero percent while leaving the band’s width and mid-point unchanged. The MAS usually holds meetings in April and October.
Unlike most central banks, the MAS uses Singapore’s currency as a policy tool to rein in inflationary expectations and support growth as trade dwarfs the island nation’s domestic activity.
To do this, the Singapore dollar operates under a managed float-currency regime based on a basket of currencies representing the city-state’s major trade partners. The currency is allowed to trade within an undisclosed band.
The central bank now forecasts 2022 core inflation at 2.5%-3.5%, compared with the 2.0%-3.0% projected in January. It also forecasts 2022 overall inflation at 4.5%-5.5%, versus 2.5%-3.5% predicted previously.
Singapore’s gross domestic product is expected to grow 3%-5% this year, the MAS said.