MAS pushes to fight inflation through monetary policy tightening 

SG Monetary policy tightens for the 5th time in 12 months

Singapore. To curb inflation, MAS tightened its monetary policy once more, therefore allowing the Singapore Dollar to appreciate.

The effect of this policy includes cheaper imports, which are set to put a halt to the rise of services and goods prices.

More from OMY: 91% of Singaporeans say inflation is getting personal

Unlike other central banks that manage their policy through the interest rate, Singapore’s MAS uses the exchange rate as its major policy tool. In a policy meeting, MAS stated that it will re-centre the midpoint of SGD nominal effective exchange rate policy band “up to its prevailing level.” However, the width and slope of the bank were unchanged.

This is the third consecutive re-centering move by MAS. Typically, re-centering is only done for recessions and other drastic situations.

Meanwhile, economists expected MAS to be more aggressive in its policies.

More from OMY: Economists and analysts now expect a higher full-year headline inflation

“I had expected a more aggressive stance from the MAS today due to inflation and the outlook for price pressures,” stated Nicholas Mapa, ING’s senior economist.

With inflation experiencing a continuous uptrend, MAS is expected to ensure the power of the Singapore Dollar.

Recently, the rising prices have majorly disrupted the price of energy, as well as imported food. Given the latest adjustments done by MAS, inflation is set to continue in the coming months.

For 2022, the expected full-year core inflation by MAS is 4%. Meanwhile, headline inflation is projected to settle at 6%.

Despite all these, the SGD is set to cement its mark as one of the most powerful currencies in Asia. So far, it has hit record levels against the Japanese yen, Korean won, and Malaysian ringgit.

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