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The Monetary Authority of Singapore (MAS) has tightened its monetary policy in an out-of-cycle move, as the island country sees inflationary pressure rising on the back of Russia’s invasion of Ukraine.

The city-state also announced that its economy grew 4.8% on the year in the April-June quarter, according to preliminary figures released on Thursday, faster than the 4.0% in the previous term.

Instead of interest rates, Singapore’s monetary policy is based on exchange rates, letting the local dollar rise or fall against the currencies of major trade partners.

In a statement, the Monetary Authority of Singapore said it would re-centre the midpoint of its exchange rate policy band up to its prevailing level. The width of the band was left unchanged.

“Overall inflationary pressures will remain elevated in the months ahead,” the central bank said. “Although global supply chain frictions are easing, external inflationary impulses have become more broad-based, reflecting underlying constraints in global commodity and labour markets.”

This is the fourth time since last October that the central bank has tightened its monetary policy. The MAS raised its forecast for core inflation to 3.0% to 4.0%, up from the earlier forecast of 2.5% to 3.5% this year.

“Domestically, resilient private consumption expenditure, underpinned by the tight labour market, will lead to greater pass-through of cost pressures,” the MAS added.

The gross domestic product figure for the quarter, meanwhile, accelerated but came in under forecasts. Economists polled by Reuters had projected 5.2% growth for the period.

The manufacturing sector expanded 8.0%, while the services sector grew 4.7% and the construction industry expanded 3.8%, the trade and industry ministry said.

The city-state’s government kept its projection of annual GDP growth in the range of 3% to 5%. But growth is likely to end up on the lower end of that range, as Russia’s war on Ukraine continues to disrupt energy and food supplies.


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