Singapore central bank tightens monetary policy in surprise move to cool inflation

The Monetary Authority of Singapore said the decision would help slow the momentum of inflation and ensure medium-term price stability

Meanwhile, the city state’s economic activity flatlined in the second quarter compared to the previous three months

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Singapore’s economy flatlined in the second quarter as soaring prices weighed on retail activity. File photo: Bloomberg

Published: 9:16am, 14 Jul 2022

Singapore’s central bank unexpectedly tightened monetary policy on Thursday, in its second surprise move this year, as it seeks to cool inflation that’s expected to quicken more than previously anticipated.

The Monetary Authority of Singapore, which uses foreign exchange as its main policy tool, signalled in a statement that it will recentre the midpoint of the policy band up to its prevailing level allowing the local currency to appreciate further against peers, a move aimed at countering imported cost pressures.

Singapore’s currency rose as much as 0.7 per cent against the US dollar, the biggest intraday gain since May. It traded at 1.3959 per dollar as at 8.12am (local time).

“There will be no change to the slope and width of the band,” The MAS said in the statement. “This policy move, building on previous tightening moves, should help slow the momentum of inflation and ensure medium-term price stability.”

The policy decision, announced soon after data showed economic activity flatlined in the second quarter compared to the previous three months, follows the monetary authority’s preferred core inflation gauge rising to the highest since December 2008. That was driven by gains across food, services, retail goods and energy.