Singapore tightens monetary policy

[kazukirai]

Singapore tightens monetary policy

SINGAPORE: Singapore on Thursday announced a tightening of monetary policy in a bid to keep a lid on inflation as data showed the economy grew an annual 8.5 per cent in the first quarter.

The Monetary Authority of Singapore (MAS), the central bank, said in a statement it would "re-centre the exchange rate policy band upwards" with economic growth seen staying solid in the coming months.

"This policy will ensure price stability in the medium term while keeping growth on a sustainable path," the MAS said in its policy statement.

Singapore's monetary policy is conducted via the local dollar which is traded against a basket of currencies of its major trading partners within an undisclosed band.

The city-state is the latest Asian economy to tighten monetary policy to curb inflationary pressures.

China, India, Vietnam and the Philippines have recently raised interest rates as energy and food prices soared.

-AFP/ac

[Musicwhiz]

Singapore tightens monetary policy

SINGAPORE: Singapore on Thursday announced a tightening of monetary policy in a bid to keep a lid on inflation as data showed the economy grew an annual 8.5 per cent in the first quarter.

The Monetary Authority of Singapore (MAS), the central bank, said in a statement it would "re-centre the exchange rate policy band upwards" with economic growth seen staying solid in the coming months.

"This policy will ensure price stability in the medium term while keeping growth on a sustainable path," the MAS said in its policy statement.

Singapore's monetary policy is conducted via the local dollar which is traded against a basket of currencies of its major trading partners within an undisclosed band.

The city-state is the latest Asian economy to tighten monetary policy to curb inflationary pressures.

China, India, Vietnam and the Philippines have recently raised interest rates as energy and food prices soared.

-AFP/ac

When I read such headlines, I cannot help but wonder if our salaries will also increase by 8.5%!

[freedom]

please raise interest rate rather than let SGD appreciate...


it will just attract more "hot money" and more inflation...

[Musicwhiz]

please raise interest rate rather than let SGD appreciate...


it will just attract more "hot money" and more inflation...

Tell that to Mr. Tharman.

So far Singapore has always tweaked Exhange Rates rather than interest rates, which I find dumb.

[corydorus]

High inflation - What has changed ?

1. People buying SGD despite low Interest Rate<= People want to escape weak currency
2. Goods more expensive despite stronger SGD<= Huge population of FT(Item 3) <= High commodities prices <= Weak USD
3. Higher demand for Goods <= Rising Population of FT <= Stronger SGD (Item1)

Weak USD causing Stronger SGD under the backdrop of Rising Population. No brainer that Strengthing of SGD will worson the problem.
I do not have Million dollar salary and small talent pool in singapore are at minister level, so am I likely to be wrong.

[kazukirai]

Maybe this will help answer some questions.

Taken from here. (An article written by NUS Prof. Anybody has access to the ST ver. linked in the page is welcome to verify the article's authenticity)

Extract:
Singapore's economy is smaller and far more open than Australia's, with trade volume a few times its gross domestic product. Exchange rate volatility would have a far greater impact on Singapore's economy.

Given that mitigating inflation and facilitating export growth are of the highest priority for the country, Singapore has chosen to reduce exchange rate volatility by embracing a managed float. And it has to maintain free capital flow as well, since growing its financial sector is another important priority.

But a policy menu comprising a managed float and free capital flow also means the domestic money supply will fluctuate as capital flows in and out.

Fortunately, Singapore has the capacity to mitigate the effects of capital flows. Its huge foreign currency reserves are helpful in defending its exchange rate against speculative capital outflow and it has financial vehicles such as its sovereign wealth fund to redirect outward any capital inflow that threatens domestic inflation. More importantly, Singapore's prudent fiscal management also helps to reduce speculative capital flows.

One disadvantage of its policy package is that its interest rate is determined by the world rate. Thus mitigating asset bubbles in a low world interest rate environment is a challenging task that requires the use of other policy instruments.

[freedom]

the problem is not just the capital inflow/outflow, but the multiplier effect.

100 billion USD capital inflow, will create new money in terms of 1 trillion USD.....

can Singapore's foreign reserve handle this kind of scale?

[kazukirai]

When I read such headlines, I cannot help but wonder if our salaries will also increase by 8.5%!

Don't worry MW, I'm sure you'll grow your portfolio by even more than that.

[freedom]

the point to reduce the multiplier rather than the amount of inflow/outflow....


please raise interest rate. don't fool everyone...