MAS' surprise move on Sing $
The Monetary Authority of Singapore (MAS) yesterday announced a surprise adjustment to its monetary policy to slow the appreciation of the Singapore dollar.
This is mainly because inflation has become less of a threat, given lower oil prices.
MAS said it will maintain the modest and gradual pace at which the Singapore dollar appreciates against a basket of other currencies, but reduce the slope of the band within which this trade-weighted exchange rate fluctuates, reported The Straits Times online.
There is no change to the width and level at which the band is centred.
The move surprised market watchers who had expected no sudden change in its monetary policy stance and saw the Singapore dollar head for its biggest slide in almost three years.
It tumbled to 1.3509 to the US dollar at 9.40am, its lowest since August 2010. It recovered some ground to trade at 1.3522 at around 3pm.
Falling oil prices
MAS revised its inflation forecast for 2015 to -0.5 per cent to 0.5 per cent, down from the 0.5 per cent to 1.5 per cent it had expected in October, mainly because of falling oil prices.
"Since the last Monetary Policy Statement in October, developments in the global and domestic inflation environment led to a significant shift in Singapore's CPI (consumer price index) inflation outlook for 2015," MAS said.
Singapore's consumer prices fell for a second straight month in December.
"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," MAS added.
The depreciation of the Singapore dollar against the broad-based strength of the US dollar was partly offset by the appreciation of the local currency against the Malaysian ringgit, euro, and Japanese yen.
MAS said its 2015 growth forecast for the Singapore economy remains at 2 to 4 per cent. It will continue to be vigilant over developments in the external environment and their impact on the domestic economy, and stands ready to curb sharp movements in the Singapore dollar nominal effective exchange rate.
Its next scheduled twice-yearly policy statement is in April.