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Apr 16

Singapore central bank stands pat on monetary policy as growth slows

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John Geddie and Aradhana Aravindan write about Singapore's monetary policy in this article about the actions of Singapore's central bank. Policymakers within Singapore expect a cooling economy and enhanced risk due to a decrease in global demand. As a result, the country is engaging in contractionary monetary policy in response to expectations. The central bank manages policy through exchange rates rather than interest rates. In IPE, we have learned that this typically limits the autonomy of monetary policy. Fixed rates typically entail governments intervening to maintain, increase, or decrease the value of the currency. For example, policymakers attempting to increase the value of the Singapore dollar could buy Singapore dollars with foreign reserves, supply of the domestic currency would decrease, and price would therefore increase. One of the advantages of fixed exchange rates is relative stability in prices and insulation from fluctuations in the market. One of the disadvantages is the limited amount of foreign reserves a country has access to. A country can only maintain a currency at a particular value depending on the amount of foreign reserves that it holds. If it is unable to maintain the value of its currency, the currency could inflate quickly due to the government's inability to prop up the value with reserves.

 

The article discusses further details of Singapore's monetary policy such as the band in which they maintain the value of their currency, inflation forecasts, and expectations affecting economic performance. GDP growth is slowing within the country as a result of a 12 percent decrease in manufacturing. Furthermore the growth of the city-state has been affected by the Sino-U.S. trade dispute and overall decrease in global demand.

 

 

 

 

https://www.reuters.com/article/us-singapore-economy-cenbank/singapore-central-bank-stands-pat-on-monetary-policy-as-growth-slows-idUSKCN1RO00I

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