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SINGAPORE: The Monetary Authority of Singapore (MAS) on Tuesday (Apr 14) tightened monetary policy and increased its inflation forecast as the Middle East conflict causes volatility in energy prices and supply.<\/p>\n
The central bank said in its April monetary policy statement that it would “increase slightly” the rate of appreciation of the\u00a0Singapore dollar nominal effective exchange rate (S$NEER) policy band.<\/span><\/p>\n There will be no change to its width and the level at which it is centred.<\/span><\/p>\n “MAS is in an appropriate position to respond effectively to any risk to medium-term price stability and will continue to closely monitor economic developments amid uncertainties in the external environment,” the central bank said, adding that it stands ready to curb excessive volatility in the S$NEER.<\/p>\n Increasing the slope of the policy band means that the Singdollar will be allowed to strengthen more quickly than before, which will make imports cheaper.<\/p>\n MAS also raised the forecast for core and headline inflation to 1.5 to 2.5 per cent on Tuesday, from 1 to 2 per cent previously. <\/strong>Core inflation excludes accommodation and private transport costs.<\/span><\/p>\n In October last year, MAS said it expected headline and core inflation to be between 0.5 to 1.5 per cent in 2026. That range was raised by 0.5 percentage points in January, and it has now been raised a second time.<\/p>\n The move to tighten monetary policy was widely expected by economists, some of whom raised their own inflation predictions for the year and are expecting further tightening.<\/p>\n MAS manages monetary policy through the exchange rate instead of interest rates. It lets the Singapore dollar strengthen or weaken against currencies of the country’s main trading partners within an undisclosed band.<\/p>\n The central bank can change the slope, mid-point or width of the band.<\/p>\n MAS last tightened its monetary policy in October 2022, when prices were rising because of increased demand after the COVID-19 pandemic and high energy prices because of the Russia-Ukraine war.<\/p>\n It has kept policy unchanged since April last year, when it loosened policy amid US-China trade war fears.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n