MAS to take a 'further calibrated step' to tighten monetary policy amid rising inflation

SINGAPORE: The Monetary Authority of Singapore (MAS) said on Thursday (Jul 14) it would take a "further calibrated step" to tighten monetary policy amid rising inflation.

It is the fourth time since October last year that MAS has tightened its monetary policy.

"Since October 2021, MAS has been on a path of gradual monetary policy tightening in view of the rise in underlying inflation and steady economic recovery," the authority said.

It added that core inflation is expected to rise above 4 per cent in the near term.

"Although it should ease in Q4 2022, there is considerable uncertainty over the extent of the decline,"  MAS said.

"At the same time, the Singapore economy remains on track to expand at a creditable pace in 2022, though with slowing momentum."

The central bank said it would be prudent to tighten monetary policy further "so as to lean against price pressures becoming more persistent".

MAS said it will re-centre the mid-point of the Singdollar nominal effective exchange rate (S$NEER) policy band up to its prevailing level.

"There will be no change to the slope and width of the band. This policy move, building on previous tightening moves, should help slow the momentum of inflation and ensure medium-term price stability," added the authority.

Unlike most central banks that manage monetary policy through the interest rate, the MAS uses the exchange rate as its main policy tool. It lets the exchange rate float within an unspecified policy band, and changes the slope, width and centre of that band when it wants to adjust the pace of appreciation or depreciation of the Singapore dollar.