Singapore yesterday announced a surprise move to tighten monetary policy, pushing the local dollar to new highs as the economy headed for between 13 percent and 15 percent expansion this year.
The Monetary Authority of Singapore signaled its anti-inflation stance after government data showed the economy expanded an annual 10.3 percent during the third quarter.
The Ministry of Trade and Industry said this meant Singapore was on track to achieve blistering growth projections this year after last year’s 1.3 percent contraction caused by the global recession.
PHOTO: BLOOMBERG
Growth in the July-to-September quarter was slower than the 19.6 percent expansion in the previous three months, but this was widely expected because of the exceptional expansion in the first half of the year.
The monetary authority said that while GDP growth was slowing to a “more sustainable pace,” domestic cost pressures are rising because of the “high level of resource utilization” and tight labor market in particular.
“Thus, the balance of risks is weighted towards inflation going forward,” the central bank added.
The bank projects underlying inflation, which excludes accommodation cost and private transport, to average 2 percent this year and 2 percent to 3 percent next year.
The last time inflation became a major concern was in 2008 when it hit 6.5 percent, the highest in nearly three decades, before the global slowdown.
Singapore’s monetary policy is conducted via the local dollar, which is traded against a basket of currencies of its major trading partners within an undisclosed band.
The monetary authority said “the slope of the policy band would be increased slightly,” which essentially means authorities will allow the Singapore dollar to continue to appreciate despite already reaching record highs.
The Singapore dollar strengthened past 1.30 to the US dollar after the announcement, hitting a new high of 1.2886.
“We believe it is concerns about inflation that have prompted MAS to increase the slope of the policy band,” said analysts from Barclays Capital, Barclays Bank’s investment banking division.
“We think this change will likely contain imported inflation pressures and help smaller, import-intensive construction companies,” they wrote in a report.
DBS Bank said in a market commentary that the monetary authority “surprised the market yet again” with its policy statement.
“Indeed, the focus is on inflation in the coming months as external inflationary pressure is expected to pick up on higher commodity prices,” the statement added.
DBS said it was maintaining its growth forecast of 15 percent for the city-state this year, adding that the slowdown in the second half was “much in line with the normalization process in Asia.”
The trade and industry ministry said the decline in growth momentum in the third quarter was “an expected correction from the exceptional growth in the first half.”
“Growth in the rest of the year will be underpinned by a number of industry-specific factors,” the ministry added.
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure