Singapore’s Semi-Annual Monetary Policy Statement Adopts a Neutral Policy Stance

April 14, 2016

The Monetary Authority of Singapore (MAS) subordinates monetary policy to an exchange rate target and had run a stance of gradual trade-weighted appreciation of the Singapore dollar for the past six years.  The rate of permitted appreciation had been flattened somewhat at an unscheduled January 2015 meeting and again last October.  In fact, the average currency value since the October change had not been different from that during the previous six months.  At today’s meeting of policymakers, the policy of gradual appreciation was stopped, at least for the coming half year.  With an unchanged band midpoint and width, the slope of the target currency corridor over the coming half year is to be flat, thus replicating the actual outcome of the last six months.

The released statement explaining today’s decision revises projected Singapore growth and core CPI inflation downward from what had been assumed at the prior review and in fact asserts that core inflation “is now likely to fall below 2% on average over the medium term.”  The changed directive “is not a policy to depreciate the domestic currency, and only removes the modest and gradual appreciation path of the S$NEER policy band that was in place.”  Today’s action is consistent with competitive depreciation policies by other governments in the Pacific Basin.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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