Singapore central bank eases monetary policy

October 14th, 2011 - 3:37 pm ICT by IANS  

Singapore, Oct 14 (IANS) The Monetary Authority of Singapore eased its monetary policy Friday after a six-monthly review.

It will continue with the policy of “a modest and gradual appreciation” of the Singapore dollar, the central bank said.

Given the expected moderation in core inflation, the slope of the policy band will be reduced, with no change to the width of the band and the level at which it is centered. This means that the pace of appreciation for the Singapore dollar is expected to slow, reported Xinhua.

Singapore adopts an exchange rate-based monetary policy, allowing the local currency to appreciate to curb imported and domestic inflation when price pressures are high. It manages the value of the Singapore dollar against a basket of currencies and the trade-weighted exchange rate fluctuates within a secret policy band.

The Singapore dollar hit record highs against the US dollar in July after the monetary authority tightened monetary policy for three times since April 2010.

It said Friday that the prospects for growth in Singapore’s major trading partners have deteriorated given the stresses and fragility in advanced economies.

With the slowdown in demand, growth in the Singapore economy could fall below its potential rate of 3-5 percent.

It expects core inflation to ease next year, although headline inflation could stay elevated in the near term reflecting the higher imputed rental cost of owner-occupied housing.

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