The city-state regulator rachets up policy for the fourth consecutive time this year in the face of continued high inflation.
The Monetary Authority of Singapore (MAS) announced on Friday that it was tightening monetary policy for the fourth successive time in 2022 and the fifth time overall since it started pivoting to its current restrictive approach in October a year ago.
The MAS indicated that it believed the step to be a prudent one and comes despite the slowing growth momentum it is seeing in the city's economy.
The effective exchange rate of the Singapore dollar has appreciated since July, when the MAS last tightened policy, as have its SIBOR interbank and overnight rates.
High Inflation
«Inflation is expected to remain high in most of Singapore’s key trading partners in the near term, while global growth moderates. The Singapore economy will grow at a slower pace in tandem with weakening global demand,» the regulator said in its statement.
It expects core inflation to remain elevated because of imported inflation and the tight job market that is inducing «strong» wage increases.
«Inflation is projected to ease more discernibly in the latter half of 2023, although there is considerable uncertainty around the outlook for both inflation and growth,» the MAS stated.
Mixed Indicators
Estimates released by the city's trade and industry ministry show the economy recovered in the third quarter from the contraction experienced in the second on an unexpectedly strong recovery in the domestic economy and travel after it relaxed COVID-19 restrictions. Manufacturing and financial services, however, remained weak.
In an economic and financial analysis, Nicholas Mapa, a senior ING economist, said the bank's step was taken in the MAS's belief that it built on its previous measures.
«We had expected a more aggressive move...the MAS will at least need to retain its hawkish tone until price pressures finally show signs of moderating,» Mapa wrote.
