At an unscheduled meeting on Wednesday, Singapore's central bank unexpectedly eased its monetary policy and downgraded its inflation forecast, citing lower oil prices.
The Monetary Authority of Singapore said it will continue with the policy of a modest and gradual appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band but the slope of the band will be reduced.
There will be no change to the width and the level of the policy band at which it is centered.
The central bank assessed that it is appropriate to adjust the prevailing monetary policy stance as the developments in the global and domestic inflation environment since the last meeting in October led to a significant shift in inflation outlook.
"This measured adjustment to the policy stance is consistent with the more benign inflation outlook in 2015 and appropriate for ensuring medium-term price stability in the economy," the bank said in a statement.
Instead of interest rates, MAS applies the exchange rate against a basket of currencies within an undisclosed band as its monetary policy tool. The bank holds monetary policy twice a year, in April and October.
Inflation is projected to come in at -0.5 to +0.5 percent, compared to 0.5 to 1.5 percent expected in October. Meanwhile, core inflation is expected to be 0.5-1.5 percent this year, down from the earlier forecast range of 2-3 percent.
In 2015, the city-state economy is forecast to remain on track to grow at a moderate pace of 2-4 percent.
Given the reasonably healthy outlook for the economy and the likelihood that inflation will rebound toward the end of 2015, Daniel Martin, an Asia economist at Capital Economics said he does not expect the MAS to loosen policy again when it meets in April.
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