MAS expected to further tighten Singdollar policy

Central bank likely to fight imported inflation with aggressive 'double-barrelled' move

- Ven Sreenivasan

The Monetary Authority of Singapore (MAS) is likely to undertake a more aggressive double-barrelled move to further tighten its Singapore dollar policy so as to mitigate the impact of rising imported inflation.

Analysts expect MAS to steepen the slope of its Singapore dollar nominal effective exchange rate (S$Neer) and also recentre the policy band higher.

The combined impact of these moves would be to effectively strengthen the Singdollar to fight imported inflation at a time when consumer prices here have risen the most in 14 years.

Economists reckon that the Singapore central bank will raise the appreciation (also known as the slope) of S$Neer towards 2 percent, from its current estimated 1.5 percent.

Recentring the S$Neer higher would further underscore the strength of the Singdollar.

But to avoid injecting currency volatility and ensure stability of the Singdollar, the MAS is unlikely to widen the policy band, experts reckon.