By Ronnie Harui
SINGAPORE--The Monetary Authority of Singapore tightened monetary policy for a fifth consecutive time to ease price pressures over the next few quarters.
Singapore's central bank will re-center the mid-point of the Singapore dollar nominal effective exchange rate policy band upward to its prevailing level, the MAS said in a statement Friday. There will be no change to the slope and width of the band, it said.
The policy shift builds on past tightening moves and will further reduce imported inflation and help curb domestic cost pressures, the MAS said. The central bank previously tightened policy at semiannual reviews in October 2021 and April 2022, as well as in off-cycle decisions in January and July of this year.
The MAS said it will continue to closely monitor global and domestic economic developments, amid heightened uncertainty on both the inflation and growth fronts, it said.
In the quarters ahead, the drag on economic activity from globally synchronized monetary tightening will intensify, the MAS said, expecting Singapore's economic growth to slow as global demand weakens.
The central bank expects gross domestic product growth of 3%-4% in 2022 and a below-trend expansion in 2023, it said.
While headline inflation should moderate, it will remain high for some time, the MAS said, with core inflation tipped to also stay elevated over the next few quarters as imported inflation remains significant and a tight labor market supports strong wage increases.
For 2022, Singapore's core inflation is expected to average around 4% and overall inflation around 6%, the central bank said. For 2023, taking into account factors including a goods-and-services tax increase, core inflation should come in at 3.5%-4.5% on average over the year, and overall inflation at 5.5%-6.5%, the MAS said.
The central bank expects that in the coming year, the cost pressures that have been accumulating along domestic and global supply chains will continue to pass through to consumer price. Even as prices of energy and food commodities have moderated from their peaks, businesses will face higher utility and raw material costs as contracts are renewed.
The central bank anticipates that Singapore's major trading partners will post below-trend growth next year, but stay in positive territory. However, further shocks--including from geopolitical tensions--could drive inflation higher and cause recessions in some key economies.
Against this backdrop, the prospects for the city-state's manufacturing sector and some trade-related services have dimmed, the central bank said. The growing weakness in electronics production and its supporting industries is likely to persist.
The MAS's monetary policy is centered on Singapore's exchange rate, which it considers an effective tool for maintaining price stability in the small and open economy.
Write to Ronnie Harui at ronnie.harui@wsj.com
(END) Dow Jones Newswires
10-13-22 2113ET
