Singapore – Easing inflation: More time needed for tighter monetary policy to affect prices, says Alvin Tan

SINGAPORE – The effects of the Monetary Authority of Singapore’s (MAS) efforts to strengthen the Singapore dollar are still working their way through the economy, and more time is needed before prices here ease discernibly, Minister of State for Trade and Industry Alvin Tan said on Wednesday.

He was responding in Parliament to Mr Yip Hon Weng (Yio Chu Kang), who had asked whether MAS would consider appreciating the Singdollar again, after Singapore’s core inflation hit 5.3 per cent in September, a 14-year high.

In the past 14 months, Singapore has conducted five rounds of monetary policy tightening. Mr Tan said this should be enough to dampen core inflation by an average of 1.5 per cent each year in 2022 and 2023.

MAS will continue to deploy monetary policy as appropriate to make sure prices here remain stable in the medium term, he said.

This, however, has to be balanced with the near-term risks associated with a stronger Singdollar amid a slowing and uncertain global economy.

The high core inflation rate reported in September includes the costs of food, services and other goods, but excludes private transport and accommodation.

Largely driven by geopolitical tensions that have led to supply chain disruptions and higher commodity prices, higher prices have led to major economies around the world raising their interest rates to keep a cap on the cost of living.

Mr Tan said the MAS expects core inflation to “stay firm” into the first half of 2023 before slowing down in the second half of 2023.

In the meantime, he said, the Government is diversifying the country’s food sources and providing more financial assistance to lower-income and vulnerable Singaporeans.

These initiatives should help with the higher food prices, he added.

Progress Singapore Party’s Non-Constituency MP Leong Mun Wai then asked Mr Tan for figures on the money supply growth in Singapore’s economy, which is an indicator of how effective Singapore’s tighter monetary policy has been.

He also asked if the high rate of accumulation in Singapore’s reserves over the past two years has had any impact on inflation.

Mr Tan said Singapore’s monetary policy is exchange-rate driven. He invited Mr Leong to file a separate parliamentary question in future sittings to get more details.