Singapore Tightens Monetary Policy As Price Pressures Build In Asia

MACROECONOMICS - SINGAPORE. Singapore's central bank tightened its monetary policy settings on Tuesday in an out-of-cycle move, as global supply constraints and brisk economic demand elevate inflation pressures across the region.

The city-state's trade-dependent economy is highly susceptible to swings in global inflation and the central bank's sudden move comes as price pressures create unease for policymakers elsewhere in Asia.

Selena Ling, head of treasury research and strategy at OCBC, said she expects the central bank to tighten again in April, describing Tuesday's move as only a "slight tightening."

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"If they had announced a more aggressive tightening today, then that would have dampened expectations for April," she said.

The Monetary Authority of Singapore (MAS), which manages monetary policy through exchange rate settings, said it would slightly raise the rate of appreciation of its policy band.

The width of the band, known as the Nominal Effective Exchange Rate, or S$NEER, and the level at which it is centered will be unchanged.

The MAS last surprised with an off-cycle move in January 2015 when it eased its policy after a collapse in global oil prices.

Other economies are also taking tightening steps.

Last week, Indonesia's central bank surprised markets with 300 basis points of staggered hikes in the reserve requirement ratio for banks over the next eight months.

Singapore's move comes just a day after data showed a price in the city-state climbed in December by the fastest pace in nearly eight years.

"This move builds on the pre-emptive shift to an appreciating stance in October 2021 and is appropriate for ensuring medium-term price stability," the MAS said, referring to its tightening move late last year.