A need for price stability amid expectations of rising inflation has pushed the Monetary Authority of Singapore (MAS) to tighten its monetary policy settings on Oct 14. The surprise move follows the accumulation in external and domestic pressures, and estimates show that core inflation will stay “close to 2% in the medium-term”. 

The metric — which gauges price increments to sectors other than accommodation and private transport — rose to 1.1% on a y-o-y basis between July and August, from 0.7% in 2Q2021.  This was in response to a rise in global commodity prices that have since been passed on through electricity and gas tariffs as well as non- cooked food inflation. Meanwhile, the inflation levels in domestic consumer items such as food and beverage services have also inched up on account of higher wages. 

MAS’s tightening move involves slightly raising the slope of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) policy band, up from a flat or zero percent slope previously. At the same time, the slope of the band — which indicates its rate of appreciation — and midpoint have been left unchanged. 

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