Singapore tightens monetary policy in surprise move as rising oil prices rekindle inflation risk - CNBC

What the report says

CNBC reported that Singapore’s central bank unexpectedly tightened monetary policy on Monday for the second time in a row, responding to renewed risks from higher oil prices even though domestic inflation remains relatively contained. The Monetary Authority of Singapore said it would raise the pace at which the Singapore dollar’s nominal effective exchange rate policy band appreciates, describing the change as “very slight” and smaller than its April move. The band’s width and midpoint were not changed.

The decision surprised many analysts: CNBC cited a Reuters poll in which economists had expected no shift in policy. Singapore’s framework differs from most central banks because the MAS guides inflation mainly through the exchange rate, managing the local dollar against a trade-weighted currency basket rather than using an interest-rate target. Selena Ling of OCBC Group Research told CNBC the move showed the authority was guarding against imported inflation after two consecutive tightenings.

According to the report, core inflation rose to 1.6% in June from 1.4% in May, while headline inflation stood at 1.9%. CNBC said Singapore is particularly exposed to global energy swings because it imports nearly all of its energy. Brent crude had moved back above $100 a barrel after attacks on Saudi tankers in the Red Sea and a breakdown in Middle East ceasefire conditions added to supply concerns.

The policy move comes as Singapore’s economy continues to show strength. CNBC reported that second-quarter gross domestic product grew 5.7% from a year earlier, ahead of Reuters’ median forecast and above the government’s full-year growth projection of 2% to 4%, helped by electronics exports linked to artificial intelligence demand.