Singapore’s central bank tightens monetary policy to decrease inflation

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Singapore’s central bank tightened monetary policy on Thursday (July 14), claiming that this move would decrease inflation as the city-state joins other countries in attempting to combat rising price pressures. Following this news, the Singapore dollar increased significantly and was last up about 0.7 per cent to S$1.33963 per dollar, with economists anticipating more tightening in October. The Monetary Authority of Singapore (MAS) tightened the monetary policy for the fourth time in the previous nine months, Reuters reported.

The central bank also stated that the core inflation rate is now estimated between 3.0 – 4.0 per cent this year, a little up from an earlier forecast of 2.5 and 3.5 per cent. Singapore’s GDP is not expected to come in at the lower half of the 3-5 per cent forecast range for this year. The country’s GDP increased by 4.8 per cent in the second quarter, below expectations, as per the preliminary data released. 

Also read | Major economies to enter recession in the next 12 months: Report

The central bank tightened monetary policy in April to combat the rising prices caused worse by the conflict in Ukraine and supply disruptions around the world. The bank schedules two meetings, one in April and the other in October, every year to discuss the monetary policy. 

Watch | Singapore’s economy grew 4.8% in the second quarter, missing forecasts

Since April, the city-state has loosened most of its Covid-19 local and travel restrictions in an effort to ais the financial and commercial hub for the economic revival. 

Also read | Eurozone inflation hits record, as gas crunch looms

As the trade flows through its economy, the MAS controls the monetary policy through exchange rate settings rather than interest rates. In addition, there are three levers used to change the policy: the slope, mid-point, and width of the policy band. These three variables allow the Singapore dollar to rise or fall against the currencies of its primary trading partners. 

(With inputs from agencies)

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