MAS tightens monetary policy amidst underlying inflationary pressures
The monetary policy will be tightened in two ways.
Taking issue with underlying inflationary risk, the Monetary Authority of Singapore (MAS) tightened the monetary policy, in two ways, after a meeting this April.
In a statement, MAS said it will first re-centre the midpoint of the exchange rate policy band at the prevailing level of the Singapore Dollar Nominal Effective Exchange Rate (SGD NEER) policy band.
Following this, MAS will raise slightly the rate of appreciation of the policy band to exert a continuing dampening effect on inflation. However, there will be no charge for the width of the policy band.
MAS’ decision to tighten the policy stemmed from the rising global commodity prices and restraints in supply chains that will add to domestic cost pressures, which will bring MAS core inflation to a significantly higher level than the historical average through 2022.
This is the third time that MAS tightened the Lion City’s monetary policy, specifically, in October 2021 and January 2022.
MAS further pointed out that the tighter monetary policy stance will decelerate the inflation momentum and ensure medium-term price stability.
As for Singapore’s gross domestic product growth, MAS sees it to come in at 3% to 5% in 2022 if there are no further disruptions caused by the Ukraine war or severe setbacks in the trajectory of the pandemic.
Also, the economy’s negative output gap is estimated to have closed at the end 2021 and should turn modestly positive in 2022.