Singapore tightens monetary policy to fight inflation as first-quarter GDP growth slows

The Monetary Authority of Singapore recentred the midpoint of the exchange rate policy band at its prevailing level to rein in surging consumer prices

The move came as data showed the city state’s GDP grew 3.4 per cent in January-March on a year-on-year basis

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Singapore’s economy grew 3.4 per cent in January-March on a year-on-year basis. Photo: AFP

Published: 10:05am, 14 Apr 2022Updated: 10:38am, 14 Apr 2022

Singapore’s central bank tightened its monetary policy on Thursday, saying the widely forecast move will slow the inflation momentum as the city state ramps up its battle against soaring prices made worse by the Ukraine war and global supply snags.

The policy tightening, the third in the past six months, came as separate government figures showed Singapore’s economic momentum waning over the first quarter.

The local dollar jumped briefly after the Monetary Authority of Singapore (MAS) recentred the midpoint of the exchange rate policy band known as the Nominal Effective Exchange Rate, or S$NEER, at its prevailing level.

It also increased slightly the rate of appreciation of the policy band. There was no change to the width of the policy band. The MAS manages monetary policy through exchange rate settings, rather than interest rates, because trade flows dwarf its economy, letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed band.

It adjusts its policy via three levers: the slope, midpoint and width of the policy band.

“The war in Ukraine has driven global inflation forecasts higher and dented the outlook for growth,” MAS said in a statement.