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Singapore is willing to live with Covid. Inflation? Not so much

Daniel Moss for Bloomberg
Daniel Moss for Bloomberg4/18/2022 10:32 AM GMT+08  • 3 min read
Singapore is willing to live with Covid. Inflation? Not so much
Singaporeans at a mall. Photo: Bloomberg
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Two of Asia's most important trading nations stepped up the fight against inflation as the battle with Covid winds down. Like the spread of the virus, officials need to reckon with a certain inevitability: The pace of price increases will only accelerate, in the medium term. No matter the response, there will be economic costs.

The Monetary Authority of Singapore, which uses the exchange rate to steer the economy, tightened its stance Thursday in two significant ways: The central bank re-centred its policy band higher and raised the slope of appreciation — the first time since 2010 that both tools were rolled out simultaneously. The upshot is that the local dollar will be encouraged to strengthen, helping dampen the effect of imported price increases. (Singapore, a small island nation with a big maritime industry, imports a great deal of the goods sold on its shelves.)

The MAS also raised forecasts for price gains and suggested further tightening may be warranted. “Underlying inflationary pressures remain a risk over the medium term,” the statement said. The central bank cited pent up discretionary spending, and demand for labour that's likely to push up wages. Officials hope an increase in foreign workers will ease at least some of the staffing shortfalls as Covid-era border restrictions loosen. “We should be able to clear the shortages within the next few months,” Finance Minister Lawrence Wong told Parliament in March.

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