More MAS tightening expected as Singapore inflation has yet to peak

On July 14, the Monetary Authority of Singapore (MAS) announced it would re-centre the mid-point of the Singapore dollar nominal effective exchange rate policy band to help slow the momentum of inflation and ensure medium-term price stability. MAS expected core inflation to come in between 3.0% and 4.0%, up from the earlier forecast range of 2.5% to 3.5%.

However, data released on July 25 showed that Singapore's annual inflation rate rose the highest since September 2008 to 6.7% in June 2022, leaping from 5.6% in May, as prices of food, transport, housing and clothing surged. And this is not the peak yet, according to economists.

Rising inflation erodes the value of money and consumers' purchasing power. Economists point out that some segments of the society may be particularly vulnerable to the impact of inflation, especially if wages do not keep up with price rises. What MAS has done earlier this month was to allow the Singdollar to strengthen against the currencies of Singapore's trading partners in an attempt to dilute the impact of imported inflation. It will not be a surprise if MAS make another such move in its next scheduled review in October.