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Singapore Tightens Monetary Policy


Singapore central bank tightened its monetary policy for the second time this year despite uncertainties surrounding US-China trade disputes.

The Monetary Authority of Singapore, on Friday, decided to increase slightly the slope of the S$NEER policy band with the width of the policy band and the level at which it was centered unchanged.

The bank said the latest action is consistent with a modest and gradual appreciation path of the S$NEER policy band that will ensure medium-term price stability.

The MAS applies the exchange rate against a basket of currencies within an undisclosed band as its monetary policy tool. The bank will hold its next monetary policy meeting in April.

With growth likely to ease over the coming year and inflation set to remain low, the bank is unlikely to tighten its policy any further, Gareth Leather and Shilan Shah, economists at Capital Economics, said.

Data published by the Ministry of Trade and Industry, earlier in the day, revealed that the city-state economy expanded at a slower pace of 2.6 percent on year in the third quarter, following prior quarter's 4.1 percent growth.

On a quarter-on-quarter seasonally-adjusted annualized basis, the economy expanded by 4.7 percent, faster than the 1.2 percent growth in the preceding quarter.

Trade frictions between some major economies and the uncertainty they pose could weigh more discernibly on global economic activity in 2019, the bank noted.

The MAS expects Singapore's GDP growth to come in within the upper half of the 2.5-3.5 percent forecast range in 2018 and moderate slightly in 2019.

For the whole year of 2018, core inflation will come in within the forecast range of 1.5-2 percent, and average 1.5-2.5 percent in 2019, the bank said. Overall inflation is projected to be about 0.5 percent in 2018 before picking up to 1-2 percent next year.

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