Monetary Authority of Singapore’s Semi-Annual Policy Review

April 14, 2014

The last monetary policy change was a tightening in April 2012.  For the third semi-annual review in a row, MAS officials concluded that current settings remain appropriate.  Domestic interest rate policy is subordinated to an exchange rate target corridor, whose upward slope was steepened two years ago.  Today’s statement defends the current policy as follows, predicting somewhat higher core inflation of 2-4% in 2014 after 1.7% last year.  Projected economic growth has a similar range.

Barring a significant shock in the external environment, the Singapore economy should expand at a moderate pace over the course of the year.  Wage pressures will persist, and firms are likely to pass on business costs to consumer prices.  Consequently, MAS Core Inflation is expected to stay elevated.  MAS will therefore maintain its policy of a modest and gradual appreciation of the S$NEER policy band.  There will be no change to the slope of the policy band, and the level at which it is centered.  The width of the band will be kept unchanged.  The policy stance is assessed to be appropriate for containing domestic and imported sources of inflation, and ensuring medium-term price stability as a basis for sustainable growth.  MAS will continue to be vigilant over developments in the external environment, including in financial markets, and stands ready to curb excessive volatility in the S$NEER. 

The statement also observes that “over the last six months, the S$NEER generally eased towards the mid-point of the policy band.”

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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