Singapore’s central bank said its monetary policy stance is appropriate as it forecast inflation might turn positive later this year.
“Unless there is a marked deterioration in the global economy or significant shift to the inflation outlook, there is no need to change the monetary policy stance,” Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), told reporters yesterday at the release of the central bank’s annual report.
Speculation had been building that the MAS would ease policy again in October to support growth in the export-dependent economy. The central bank, which uses the exchange rate rather than interest rates as its main tool, moved to a neutral policy of zero percent appreciation in April.
The bank said headline inflation would probably turn positive this year, a departure from its guidance last month that consumer prices would continue to decline for the rest of the year.
“Inflation remains subdued,” MAS Chairman Tharman Shanmugaratnam, who is also Singaporean deputy prime minister, said in the bank’s annual report. “Headline inflation has been negative for some time, but could turn positive towards the later part of this year.”
The consumer price index for all items — a measure of headline inflation — has declined every month since November 2014, the longest slump on record, reflecting the effect of lower oil costs and a weaker property market.
Prices fell 0.7 percent last month from a year earlier, the statistics office said in a separate report yesterday, compared with a median estimate for a 1.1 percent decline in a Bloomberg survey of 17 economists.
Singapore remains vulnerable to swings in global demand as the world still grapples with the UK’s decision to leave the EU.
Singapore’s economy expanded an annualized 0.8 percent in the second quarter, compared with the previous three months, according to an advanced government estimate.
The MAS yesterday reiterated its forecast for growth of 1 percent to 3 percent for the full year.
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