By Ronnie Harui
SINGAPORE--Singapore's central bank unexpectedly tightened its currency policy to cushion against imported inflation pressures that stem from strengthening global demand and lingering supply-chain constraints.
The Monetary Authority of Singapore said that it will "slightly" raise the slope of the Singapore dollar's policy band from the current zero percent.
The monetary authority had been expected to leave policy unchanged at Thursday's semiannual review, according to 12 of 14 economists and analysts polled by The Wall Street Journal.
The central bank uses the Singapore dollar as its policy tool to dampen inflation expectations and to support growth, because the country's foreign trade dwarfs its domestic economic activity.
To do this, the Singapore dollar operates under a managed float currency regime based on a basket of currencies of the city-state's major trading partners, and is allowed to trade within an undisclosed band.
"This appreciation path for the S$NEER (Singapore dollar nominal effective exchange rate) policy band will ensure price stability over the medium term while recognising the risks to the economic recovery," the MAS said. The width of the policy band and the level at which it is centred was not changed, it said.
The U.S. dollar-Singapore dollar exchange rate was down 0.2% at 1.3485 following the MAS' decision.
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(END) Dow Jones Newswires
October 13, 2021 20:38 ET (00:38 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.