Friday, the Monetary Authority of Singapore shifted its policy stance to a zero percent appreciation of the Singapore dollar nominal effective exchange rate, after the economy contracted in the third quarter. According to the central bank, the current level of the policy band will be maintained and there would be no re- centering of the band or change to its width.
The central bank stated in its Monetary Policy Statement that it stands willing to intervene to dampen excessive volatility in the S$NEER, if necessary. The Monetary Authority of Singapore would continue to closely watch developments in the external economy and their influence on the Singapore economy.
The MAS had maintained its policy of gradual appreciation of Singapore dollar nominal effective exchange rate or S$NEER policy band since April 2004.
In October 2007, the central bank had tightened its foreign exchange policy through a slight increase in the slope of the band. Thereafter, the MAS re-centered the exchange rate policy band at the then prevailing level of the S$NEER in April 2008. This policy stance assisted the MAS in mitigating inflationary pressures amidst sustained economic growth and rising global commodity prices.
In a note, the DBS bank said the shift in policy stance was exactly in line with their expectation and would be useful in terms of providing the necessary support for medium growth outlook.
The MAS manages the Singapore dollar against an undisclosed basket of currencies. The trade-weighted exchange rate is allowed to fluctuate within an undisclosed policy band, rather than kept to a fixed value.
The Singapore economy shrank on an annualized quarter-on-quarter basis by 6.3% in the third quarter compared with a 5.7% decline in the previous quarter. Deterioration in global economic outlook poses new uncertainties for the Singapore economy. The economy is expected to expand around 3% in 2008, revised down from an earlier estimate of 4%-5%. Further, economic growth would possibly stay below its potential over the coming few quarters and chances of recovery in the latter half of 2009 depend considerably on how conditions would evolve in the G3 and regional economies.
Meanwhile, inflation forecast for 2008 remain unchanged at 6%-7%. The MAS underlying inflation measure, which excludes accommodation and private road transport costs, is expected to 5%-6%. CPI inflation is predicted to trend down in 2009 and for the year as a whole, inflation is forecast to moderate to 2.5%-3.5%.
In a speech made on Friday, Singapore's Prime Minister, Lee Hsien Loong said the world is caught up in a financial storm, and dark clouds fill our immediate horizon. "In Singapore, our growth is already slowing, but our financial system is sound, and our economy remains competitive". "Our strategy of growing with Asia also remains valid, because we are confident that Asia's dynamism will endure," Prime Minister added.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.