Singapore’s central bank tightened monetary policy for a second time this year, encouraged by steady economic growth despite worsening US-China trade tensions.
The Monetary Authority of Singapore (MAS), which uses the exchange rate as its main policy tool, raised the slope of its currency band slightly, according to a statement on its Web site yesterday. That implies it would seek an appreciation in the currency.
Just more than half of the 21 economists surveyed by Bloomberg predicted the move, with the rest expecting no change.
A separate report yesterday showed GDP grew an annualized 4.7 percent in the third quarter from the previous three months, compared with a median estimate of 5 percent in a Bloomberg survey.
The economy expanded at a 2.6 percent year-on-year rate in the three months through September, beating the median projection for 2.4 percent.
Demand for electronics, biomedical manufacturing and transport engineering was credited for the pickup in the manufacturing sector, which grew 7.6 percent from the previous quarter, when it gained 2.9 percent.
While global economic risks have risen on the back of the US-China trade conflict, there is no reason to “overreact,” MAS Managing Director Ravi Menon said in an interview this week.
The global economy has “underlying resilience,” he said.
The MAS repeated the word “resilient” in the statement to describe global growth in the face of trade tensions.
Singapore’s economic growth was judged to be running “slightly above potential” and expected to expand at a “slower, but steady pace” for the remainder of this year and into next year, according to the statement.
The MAS guides the local dollar against a basket of its counterparts and adjusts the pace of its appreciation or depreciation by changing the slope, width and center of a currency band. It does not disclose details on the basket, or the band or the pace of appreciation or depreciation.
Economies across Asia have been tightening this year. After an early move by Malaysia, Indonesia and the Philippines have raised interest rates aggressively to curb currency weakness. India raised rates twice since June, but kept them unchanged last week.
“They see building domestic price pressures, which is a key reason” to tighten, said Khoon Goh (吳昆), head of research at Australia and New Zealand Banking Group in Singapore, referring to the MAS.
The central bank will continue to tighten next year if growth and inflation evolve as expected, he said.
“This is definitely not the end of it,” he said.
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