Singapore on Thursday slightly tightened monetary policy sanctioning an immediate rise in the value of its currency, saying headline inflation will likely stay elevated.
The central bank also adjusted its inflation target slightly by saying consumer price index inflation is expected to come in at the upper half of the 3-4% forecast range.
“The exchange rate policy band will be re-centred below the prevailing level of the S$ NEER (nominal effective exchange rate),” the Monetary Authority of Singapore (MAS) said in its half-yearly monetary policy statement.
MAS said the adjustment takes into account the tighter policy stance adopted in April and October last year, which will continue to have a restraining effect on the economy and prices.
“There will be no change to the slope and width of the band,” the central bank added.
The Singapore dollar (SGD=) rose as high as $1.2452 to the US dollar from $1.2555 before the central bank released its policy statement.
It has gained close to 2% against the US dollar so far this year, hitting a record high, as the MAS and many other Asian central banks allow their currencies to appreciate to contain imported inflation.
MAS conducts policy by managing the value of the Singapore dollar against a basket of other currencies, which it deems as more effective than setting interest rates given the city-state’s high level of imports.
Nine of 12 economists polled by Reuters before the meeting had predicted Singapore would tighten policy in some way at the review.
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