Sin­ga­pore cen­tral bank tight­ens mon­e­tary pol­icy

Gulf Times Business - - BUSINESS -

Sin­ga­pore’s cen­tral bank yes­ter­day tight­ened mon­e­tary pol­icy for the sec­ond time this year, say­ing the city-state’s econ­omy is likely to ex­pand steadily bar­ring a set­back to global growth from trade fric­tions be­tween the United States and China.

The Mon­e­tary Au­thor­ity of Sin­ga­pore (MAS), which man­ages pol­icy through ex­change rate set­tings rather than in­ter­est rates, said it would slightly in­crease the slope of the Sin­ga­pore dollar’s pol­icy band, as pre­dicted in a Reuters poll.

It kept its other two pol­icy levers – the width and mid-point of the band – un­changed.

In its semi-an­nual pol­icy state­ment, the MAS said in­fla­tion is pro­jected to rise in the near term and that price pres­sures would be fu­elled by a per­sis­tent “small, pos­i­tive” out­put gap, mean­ing ac­tual GDP run­ning slightly above po­ten­tial.

Econ­o­mists said the out­look de­picted by MAS sug­gests fur­ther tight­en­ing could be on the cards next year.

“We now see a strong like­li­hood that the MAS will tighten once more in April 2019,” said Jeff Ng, chief econ­o­mist at Con­tin­uum Eco­nom­ics.

Eleven of 20 an­a­lysts in a Reuters sur­vey pre­dicted the MAS would tighten pol­icy via a slope in­crease, and the Sin­ga­pore dollar was slightly firmer against the US dollar af­ter the move.

The cen­tral bank said global growth has been ‘rel­a­tively re­silient’ so far, but cau­tioned about the risks from trade fric­tions.

“In 2019, trade fric­tions be­tween some ma­jor economies and the un­cer­tainty they pose could weigh more dis­cernibly on global eco­nomic ac­tiv­ity,” it said. “Bar­ring a sig­nif­i­cant set­back in global growth, the Sin­ga­pore econ­omy should ex­pand at a pace close to po­ten­tial in 2019.”

Two of Sin­ga­pore’s top trad­ing part­ners – the United States and China – are in­volved in a tar­iff dis­pute and the city-state’s pol­i­cy­mak­ers and politi­cians have long-flagged the risks this poses to the global trad­ing and fi­nan­cial hub.

In the lat­est es­ca­la­tion of the row, the United States slapped tar­iffs on $200bn worth of Chi­nese goods last month, prompt­ing Bei­jing to re­tal­i­ate with ad­di­tional du­ties on $60bn of US prod­ucts.

Ear­lier this week, the In­ter­na­tional Mon­e­tary Fund cut its global eco­nomic growth fore­cast for this year and next, say­ing that the trade row be­tween the world’s two largest economies was tak­ing a toll and emerg­ing mar­kets were strug­gling with tighter liq­uid­ity and cap­i­tal out­flows.

Data re­leased on ear­lier yes­ter­day showed Sin­ga­pore’s econ­omy ex­panded slightly less than ex­pected in the third quar­ter from the pre­vi­ous quar­ter on an an­nu­alised ba­sis..

MAS said GDP growth should come within the up­per half of the 2.5%-3.5% fore­cast range in 2018 and mod­er­ate slightly in 2019.

The cen­tral bank ex­pects its mea­sure of core in­fla­tion to edge up to around 2% in the months ahead, but come in within its 1.5%-2% range this year.

The Mon­e­tary Au­thor­ity of Sin­ga­pore, which man­ages pol­icy through ex­change rate set­tings rather than in­ter­est rates, said it would slightly in­crease the slope of the Sin­ga­pore dollar’s pol­icy band, as pre­dicted in a Reuters poll.

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