In order to combat inflation that is approaching a 14-year high, Singapore tightened its monetary policy for the fourth time this year as anticipated. However, it left the door open for additional policy action while highlighting risks to the economic and price outlook.
The action by the Monetary Authority of Singapore (MAS) continues a coordinated tightening drive by multiple nations, led by the U.S. Federal Reserve. Separate data showed that the city-economy state outperformed in the third quarter.
The MAS stated that it will raise the midpoint of its exchange rate-based policy range to current levels, but left the band’s slope and width untouched. “The Singapore economy will grow at a slower pace in tandem with weakening global demand,” MAS said. “However, core inflation will stay elevated over the next few quarters, as imported inflation remains significant and a tight labour market supports strong wage increases,” it added in its statement.
To control the surging inflation in the Asian financial hub that relies on trade, the central bank took two out-of-cycle tightening actions in January and July. The MAS tightened its policy band for the fifth time since last October, which some people viewed as less aggressively because it changed only one of the three levers. The last time MAS changed two policy levers simultaneously was in April. On how strongly MAS might tighten this round, analysts were divided.
The Fed and many other officials have been battling runaway inflation even as recession chances have increased. The central bank said all the tightening measures so far will further decrease imported inflation but warned about continuing cost pressures.
The Singapore dollar appreciated against the US dollar and recently traded at $1.4214, up 0.64%. Despite the US dollar losing nearly 5% of its value this year, it is Asia’s best-performing currency, compared to double-digit drops for most of its regional peers.
