The Monetary Authority of Singapore (MAS) says in its monetary policy statement that it will reduce the slope of the Singapore Dollar Nominal Effective Exchange Rate policy band to slow the appreciation of the currency.
The Monetary Authority of Singapore (MAS) said on Wednesday (Jan 28) it will adjust its monetary policy and let the Singapore dollar appreciate at a slower pace.
The revision in monetary policy came as a surprise as MAS was only scheduled to release its next monetary policy statement in April.
“MAS will continue with the policy of a modest and gradual appreciation of the Singapore Dollar Nominal Effective Exchange Rate policy band. However, the slope of the policy band will be reduced, with no change to its width and the level at which it is centred,” the central bank said in its monetary policy statement.
“This measured adjustment to the policy stance is consistent with the more benign inflation outlook in 2015 and appropriate for ensuring medium-term price stability in the economy,” it added.
MAS said the previous policy stance – which has been in place since April 2012 – was appropriate for containing domestic and imported sources of inflation, and ensuring that inflation expectations remain well anchored.
However, the outlook for inflation has since shifted significantly, largely due to the decline in global oil prices, it said.
The central bank also lowered its inflation outlook for 2015. CPI-All Items inflation, or headline inflation, is now projected to come in at -0.5 to 0.5 per cent, down from 0.5 to 1.5 per cent in its previous inflation forecast.
As for core inflation, which excludes the cost of accommodation and private road transport, MAS said this is likely to average 0.5 to 1.5 per cent this year, down from the earlier forecast of 2 to 3 per cent.
The Singapore economy remains on track to grow at a moderate pace of 2 to 4 per cent this year, it added.
"While Singapore has brought its exchange rate policy closer to the generalised monetary easing seen in many countries globally, it still has a modest appreciation policy," DBS said in a commentary.
As such, the US dollar is expected to rise at a slower pace against the Singapore vis a vis the currencies of most other countries, it said.