Singapore C.Bank says committed to price stability
SINGAPORE, May 7 — Singapore’s central bank is committed to price stability in the medium term and monetary policy should temper but not totally offset cost pressures from the supply side, its deputy managing director Ong Chong Tee said today.
Ong also said inflation was expected to ease gradually over the year but along a somewhat elevated trajectory and that the Monetary Authority of Singapore (MAS) policy stance was aimed at keeping the economy on an even keel.
The government expects Singapore’s economy to expand 1 to 3 per cent this year but the MAS has said it sees weakness in electronics dragging on growth.
The MAS surprised financial markets last month by saying it will tighten monetary policy slightly because of persistent inflationary pressures.
“With respect to cost pressures arising from the supply side, monetary policy should aim to temper but not fully offset this,” Ong told a conference.
“Higher labour costs in the short term due to permanent supply side shifts are part and parcel of the market equilibrating process to guide the economy to a more sustainable growth path.”
The MAS recently raised its forecast for headline inflation this year to 3.5 to 4.5 per cent and has said higher wages and global oil prices will put upward pressure on prices. It also said business costs are likely to rise as Singapore makes it harder for companies to bring in cheap foreign labour.
Inflation remains a concern in many parts of Asia due to rising commodity prices and easy monetary policy in the West that has resulted in hot money inflows.
“Over time, the cumulative appreciation of the exchange rate will temper the pace of price increases in the economy,” Ong said.
“MAS is fully committed to our objective of price stability over the medium term, even as productivity improvements arising from the significant economic restructuring will help to prevent higher costs from fuelling strong price increases.” — Reuters