Singapore sticks to plan for tightening of monetary policy

The Monetary Authority of Singapore (MAS) plans to further tighten monetary policy through the fifth exchange rate adjustment since October 2021. MAS’ policy is aimed at curbing inflation, even though their actions could threaten sustainable economic growth. 

On Friday, MAS, which manages monetary policy through exchange rate settings, rather than interest rates, will announce measures aimed at strengthening the local dollar, according to estimates of 19 economists surveyed by Bloomberg. The main purpose is to curb imported inflation pressures. 

Policymakers are struggling with finding a balance between fighting inflation and protecting economic growth amid unabated price pressures at home and abroad and growing risks of a global recession. The city-state, which has an export-oriented economy, has to buffer its currency amid interest rate hikes by the Fed. At the same time, Singapore authorities acknowledge that the economic slowdown in China and Europe will make it difficult to continue to tighten policy.

Inflation forecast may be revised by MAS. On September 23, MAS reiterated its expectations for the core indicator based on August's preferred core inflation rate, which was close to a 14-year high. The new forecast shows that the core gauge will be between 3% and 4% for all of 2022, with the headline figure at 5% to 6%.

MAS, together with the Ministry of Trade and Industry, tends to release a growth forecast for the next year in the final third-quarter GDP report in November. However, the data on long-term economic growth risks that will be released on Friday will be telling.

Any comments from authorities on the region's recovery from the pandemic crisis will draw attention, as the city-state has been among the earliest states in Asia to expand quarantine-free travel.