Singapore tightens monetary policy amid steady growth outlook
SINGAPORE (Oct 12): Singapore’s central bank tightened monetary policy for a second time this year, encouraged by steady economic growth despite worsening US-China trade tensions.
The Monetary Authority of Singapore, which uses the exchange rate as its main policy tool, raised the slope of its currency band slightly, it said in a statement on its website on Friday. That implies it will seek an appreciation in the currency. Just over half of the 21 economists surveyed by Bloomberg predicted the move, with the rest expecting no change.
The Singapore dollar gained less than 0.1% to 1.3758 against the US currency as of 8.02 am on Friday.
Led by the US Federal Reserve, global central banks are moving away from the ultra-easy policy of recent years, encouraged by solid growth and a slow pick-up in inflation. In trade-reliant Singapore, growth is seen moderating from last year’s 3.6%, yet still at a healthy pace of 2.5% to 3.5%.
A separate report on Friday showed gross domestic product grew an annualised 4.7% in the third quarter from the previous three months, compared with a median estimate of 5% in a Bloomberg survey.
Resilient Growth
While global economic risks have risen on the back of the US-China trade conflict, there’s no reason to “ overreact,” MAS Managing Director Ravi Menon said in an interview this week. The global economy has “underlying resilience,” he said.
The MAS guides the local dollar against a basket of its counterparts and adjusts the pace of its appreciation or depreciation by changing the slope, width and center of a currency band. It doesn’t disclose details on the basket, or the band or the pace of appreciation or depreciation.
Economies across Asia have been gradually tightening this year. After early moves by South Korea and Malaysia, Indonesia and the Philippines have been raising interest rates aggressively to curb currency weakness. India raised rates twice since June, but kept them unchanged last week.
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