SINGAPORE- Singapore’s central bank tightened its monetary policy on Thursday, in an off-cycle move, saying the action would slow inflation as the city-state joins other economies scrambling to fight mounting price pressures.
The Singapore currency jumped broadly after the news and was last up almost 0.7 percent to S$1.3963 per dollar, with economists expecting further tightening in October.
The tightening was the Monetary Authority of Singapore’s fourth in the past nine months and comes hot on the heels of Canada’s surprise 100 basis point interest rate hike on Wednesday and just before an out-of-cycle 75 basis point hike in the Philippines on Thursday.
“Clearly, MAS is very concerned about inflation. It is just going to try to do all they can to put the brakes on inflation,” said Chua Hak Bin, an economist at Maybank.
The US Federal Reserve is also seen stepping up its monetary tightening campaign with a supersized 100 basis point rate hike this month after a grim inflation report showed inflation racing at four-decade highs.
New Zealand and South Korea both delivered half percentage point rate hikes on Wednesday.
The MAS said it would re-center the mid-point of the exchange rate policy band known as the Nominal Effective Exchange Rate. There will be no change to the slope and width of the band, it said.
“This policy move, building on previous tightening moves, should help slow the momentum of inflation and ensure medium-term price stability,” the MAS said in a statement.
The central bank also said Singapore’s gross domestic product growth is expected to come in at the lower half of the 3-5 percent forecast range for 2022, while core inflation is now projected between 3.0—4.0 percent for the year, up from an earlier forecast of 2.5—3.5 percent.
Preliminary data on Thursday showed Singapore’s GDP grew 4.8 percent in the second quarter, missing forecasts.
Singapore’s core inflation rate – the central bank’s favored price measure – rose in May at its fastest pace in more than a decade, to 3.6 percent, just above forecasts, driven by higher inflation for food and utilities. – Reuters
