Singapore Central Bank Follows the Pack

The MAS indicates it will continue to tighten policy to slow inflation and ensure price stability in the medium term.

The Monetary Authority of Singapore (MAS) indicated in a statement published on its website Thursday that it believes it is «prudent» to take another «calibrated step to tighten monetary policy».

Along with numerous other international central banks, it believes that doing so will prevent inflation from increasing further given that it expects that pressures on prices will remain elevated over the next few months, as it expects core inflation to rise to slightly more than 4 percent in the short term before it eases.

Although global supply chain frictions are easing, external inflationary impulses have become more broad-based, reflecting underlying constraints in global commodity and labor markets, the MAS indicated.

Unlike many other central banks, the MAS uses the exchange rate for the Singapore dollar to set policy given its open and relatively small economy. The policy is set by adjusting the Singapore dollar’s trading band, based on an undisclosed basket of currencies weighted to the countries’ levels of trade with the city-state. The MAS can adjust the mid-point of the band, the size of the band, and the slope of the appreciation.

In the statement released Thursday, the MAS indicated that it would re-center the midpoint of the policy band, which builds on previous steps that it has taken. It did not change the slope or width of the band.