Singapore tightens monetary policy amid inflation concerns

Singapore’s central bank tightened monetary policy settings, as stronger-than-expected domestic economic growth allowed policymakers room to keep fighting inflationary pressures.

The Monetary Authority of Singapore, which uses the exchange rate of the local dollar as its main policy tool, re-centered the midpoint of the currency’s policy band up to its prevailing level, according to a statement Friday. That will allow the local currency to strengthen, and in turn keep global shocks from feeding into local prices.

The Singapore dollar strengthened as much as 0.5% to 1.4243 per US dollar after the MAS decision, which was predicted accurately by only four of 19 economists surveyed by Bloomberg. While all of them expected some sort of tightening, six had seen an adjustment to slope and nine expected the authority to employ both the moves.

MAS’s policy tightening — the fifth since October 2021 — came as inflation data showed no sign of a peak in price gains, even as latest gross domestic product numbers showed the economy returned to growth in the third quarter. The decision also preempts the Federal Reserve, which is under pressure to stick with outsized hikes next month after latest US consumer price data showed the core measure rose to a four-decade high.

Highlights from GDP print:
  • GDP grew 1.5% in three months to September from previous quarter, after -0.2% showing in 2Q
    • That’s faster than Bloomberg survey estimate for 0.7% expansion
  • On a year-on-year basis, the economy expanded 4.4% after a revised 4.5% expansion in 2Q
    • Manufacturing +1.5% year-on-year, after +5.7% in the previous quarter
    • Construction +7.8%, after +4.8%
    • Services industries +6.1%, after +4.8%

The MAS had to weigh ongoing effects of a stronger dollar and imported inflation against darkening prospects for the global economy that would prompt a shift to more growth-focused, less tight financial conditions.

“Today’s decision to only re-center likely tries to balance the downside growth risks with the upside inflation risks,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group in Singapore. “It is too soon to say this is the end of the tightening cycle. If Singapore inflation continues to surprise to the upside, then MAS will still need to respond but the hurdle for another re-centering is now very high.”

The Singapore dollar has been among the least hit currencies in Asia, depreciating 5.7% against the greenback from the start of the year through the end of Thursday while most of the region’s major currencies have dropped by double digits over the same period. Singapore officials, including at the MAS, have projected inflation will stay elevated this year and “ease more discernibly in the latter half of 2023.”

The central bank retained its 3%–4% growth forecast for 2022, while narrowing the inflation readings to the top of their previously estimated ranges. Accordingly, core inflation is seen averaging at 4% this year and all-items is seen at 6%.

Date Slope Width Center
October 2022 No change No change Recentered upwards
July 2022 No change No change Recentered upwards
April 2022 Increased slightly No change Recentered upwards
January 2022 Increased slightly No change No change
October 2021 Increased slightly No change No change


Officials convening in Washington this week for meetings organized by the International Monetary Fund and World Bank have painted a bleaker picture of the global outlook, with IMF Managing Director Kristalina Georgieva predicting one-third of the world economy will see recession this year and next. – BLOOMBERG