SINGAPORE: The Monetary Authority of Singapore tightened its monetary policy on Tuesday in an unexpected inter-meeting move aimed at countering rising inflation.
The central bank also changes the slope, width and mid-point of this band when it wants to adjust the pace of appreciation or depreciation of the local currency based on assessed risks to Singapore’s growth and inflation. The last time the MAS lowered the band’s center was in March last year, when it also flattened the slope in a two-in-one easing move as the economy reeled from the pandemic's impact.
“There remain upside risks to inflation arising from the impact of pandemic-related and geopolitical shocks on global supply chains,” it added. With that, MAS said it now expects core inflation, which strips out private transport and accommodation costs, to rise between 2 and 3 per cent this year. This is above the 1 to 2 per cent forecast it had in October.
“So they chose to be pre-emptive, clearly seeing that prices are not going to come off anytime soon,” said Mr Song, adding that first-quarter inflation numbers will likely “be even higher”. Noting how the prices for everyday items have risen and are likely to go up further amid persistent global supply chain snarls and the rally in commodity prices, Mr Song said: “From the MAS’ standpoint, it cannot make external prices go down but what it can do is to use the exchange rate to minimise higher import costs.
“But it’s good and bad news. Those who get to travel may enjoy a stronger Sing dollar but the flip side is that from travel package, insurance to items you buy, has become more expensive given how inflation is moving up across the world. Everything costs more now,” said Mr Song.Economists said further tightening moves by the MAS cannot be ruled out, with the central bank eyeing inflation trends and the economy’s first-quarter GDP performance.
What if mkts capitulate 75-80% and take 4 years to recover, with Fed unable to change sentiment?‽?
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