Singapore’s Central Bank Gearing Up for Even More Tightening
In a bold move that’s been brewing for a while, the Monetary Authority of Singapore (MAS) is set to make next month’s policy review stand out again. With global supply chains still feeling the pinch and the city‑state dialling back its travel restrictions, inflation seems to be primed for a rally.
Polled Economists Are All‑in on Tightening
All 15 economists we asked agree on one thing: MAS will tighten its policy. What’s up for debate, though, is how far they’ll push the dial and which part of the policy mix they’ll tweak.
The Nominal Effective Exchange Rate: The Real “Interest Rate”
Singapore isn’t setting a conventional interest rate. Instead, it controls how the Singapore dollar moves against the currencies of its biggest trading partners inside a band that it keeps secret. The band has three levers: its slope, its mid‑point, and its width.
- Slope Only – Three economists expect MAS to simply steepen the band’s slope.
- Slope + Mid‑Point – Five think the band will get steeper and the mid‑point will shift upward. That’s a bit more aggressive.
- Mid‑Point Only – Another five foresee a move that nudge the mid‑point higher but leave the slope and width untouched.
- All Three – A few analysts predict changes across slope, mid‑point, and width – the most dramatic scenario.
Different Views on the Levers
Typically, a slope change is considered a milder tweak, while a mid‑point shift is more aggressive. Width adjustments are mainly about how much the dollar can wiggle.
Here’s what a few of the economists saw:
- Khoon Goh (ANZ) – “No big growth worries from geopolitics, but we’re seeing higher inflation risk. That means MAS has to act.”
- Bank of America – “Just slope for now, though a midpoint shift could happen. The width might also widen.”
- Barclays – “We foresee changes to all three levers.”
- Morgan Stanley – “We think the slope will steepen and the band will widen, as was done back in 2010.”
When Is the Decision Coming?
The MAS will drop its next semi‑annual monetary policy statement by April 14.
Some Quick Numbers to Keep in Mind
MAS in January tightened policy again, and this back‑to‑back tightening trend is the heart of the story.
- February headline prices rose at a nine‑year high, mostly because of higher private transport costs.
- Core prices eased for the first time since June of last year.
- Core inflation is now expected to be in the 2‑3% range for the rest of the year, up from 0.9% a year earlier.
- Headline inflation is projected to average somewhere between 2.5% and 3.5%.
Economic Outlook – Growth, Government, and the Open‑Up Drive
Last year, the government had projected a 3‑5% GDP growth. The finance minister, Lawrence Wong, said this year the economy should keep moving forward. He also kept an eye on the Russia‑Ukraine conflict, ready to deploy more fiscal or monetary tools if needed.
Singapore made its biggest post‑COVID reopening move last month, letting vaccinated travelers fly in without a quarantine. The move is one of many to steady the economy while keeping inflation in check.
All In
Bottom line: MAS is likely to tighten again, but the extent and method remain a toss‑up. Stay tuned for the April release – it’s going to be an exciting month for anyone caring about Singapore’s financial policy and inflation.
