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Singapore Central Bank tightens Monetary Policy to cool inflation

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Singapore (CU)_ In response to intensifying pricing pressures, the Monetary Authority of Singapore has tightened monetary policy in an unexpected move. According to the latest statement from the MAS, Singapore’s central bank will re-center the midpoint of the Singapore dollar nominal effective exchange rate policy band up to its prevailing level. The slope and width of the band will not be altered.

The central bank stated that the policy move, which builds on prior tightening, should help moderate inflation’s pace and guarantee medium-term price stability. The MAS will continue to watch global and local economic growth trends in the midst of heightened uncertainty on the inflation and growth fronts.

According to the MAS, inflationary pressures are expected to remain high in the coming months. Although global supply-chain frictions are reducing, external inflationary pressures have grown more pervasive as a result of underlying restrictions in the global commodities and labor markets. According to the report, domestically, robust private consumer spending, supported by a strong labor market, will result in a larger pass-through of cost pressures.

reuters.com

As a result, the MAS predicts that Singapore’s core inflation would increase slightly over 4 percent in the near future before declining by the end of 2022. This year’s core inflation is now anticipated to range between 3.0 and 4.0 percent, which is a rise from a previous expectation of 2.5 to 3.5 percent. As auto and accomodation price hikes are anticipated to remain steady, headline inflation is estimated to be between 5.0 percent and 6.0 percent, which is a rise from the prior forecast range of 4.5 percent to 5.5 percent.

According to the MAS, slowing external economic momentum would weigh on Singapore’s trade-related industries in the second half of this year. According to the central bank, the domestic and travel-related areas are projected to continue their recovery and boost economic development. Overall, Singapore’s GDP growth in 2022 is estimated to land in the lower half of the anticipated range of 3 percent to 5 percent.

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