Timely move to keep inflation in check

With inflation rising faster than expected, the Monetary Authority of Singapore (MAS) took the unusual step on Tuesday of tightening its monetary policy stance in between its regular policy meetings, which happen in April and October. By slightly steepening the slope of the Singapore dollar policy band, the MAS raised the ante in its battle against imported inflation. It took the first step last October when it shifted to a gradual appreciation path for the Singdollar, from zero per cent previously. A stronger Singdollar dampens the inflationary impact of higher import prices, which is important for Singapore's highly import-dependent economy.

The MAS decision came a day after data showed inflation already running ahead of its earlier forecasts for 2022. All-items inflation rose to 4 per cent in December, the highest level since February 2013 and well above the upper end of the MAS' forecast of 2.5 percent. At 2.1 per cent, core inflation, which excludes private transport and accommodation costs, was also slightly above forecast. On Tuesday, the MAS raised its projections to 2.5 per cent to 3.5 per cent for all-items inflation and 2 per cent to 3 per cent for core inflation.