Singapore Inflation Accelerates, Requiring Stronger Currency
April 23, 2010, 1:16 AM EDT
By Shamim Adam
April 23 (Bloomberg) -- Singapore’s consumer prices rose the most in 12 months in March amid an economic rebound that has led policy makers to allow the island’s currency to strengthen.
Singapore’s central bank said this month it would undertake a one-time revaluation of the currency and seek its gradual and modest appreciation, joining other Asian nations in tightening monetary policy. The government raised its 2010 growth forecast for the $182 billion economy to as much as 9 percent as the global recovery boosts demand for goods and services.
“March inflation is a precursor of things to come,” Song Seng-Wun, an economist at CIMB-GK Research Pte in Singapore, said before the report. “Stronger-than-expected global demand may push commodity prices including energy much higher than initially projected. The central bank took a view that it should stay ahead of the curve.”
The Monetary Authority of Singapore uses the currency instead of interest rates to conduct monetary policy. It said April 14 it will “re-centre the exchange rate policy band at the prevailing level” of the Singapore dollar, shifting to a stronger range for the currency to trade in. The central bank guides the Singapore dollar against a basket of currencies within an undisclosed band.
The Singapore dollar is the best performing currency in Asia this month, rising 1.9 percent against the U.S. dollar to S$1.3739.
Inflation Forecast
Inflation will probably average between 2.5 percent and 3.5 percent this year, from a previous estimate of as much as 3 percent, the central bank said in an April 14 statement.
“Consumer price inflation has trended higher since the third quarter of last year, largely due to the rise in global commodity prices and private road transport costs,” it said. “These two factors will continue to drive headline inflation rates up for the rest of 2010. Other domestic sources of inflationary pressures, though subdued presently, could be expected to emerge in the coming quarters.”
The strengthening economy may spur wage growth and commercial rentals are likely to rise, the central bank said.
Food prices rose 0.9 percent in March from a year earlier, and transport costs increased 10.1 percent. Housing prices, the biggest component of the consumer price index, slid 0.7 percent.
April 23, 2010, 1:16 AM EDT
By Shamim Adam
April 23 (Bloomberg) -- Singapore’s consumer prices rose the most in 12 months in March amid an economic rebound that has led policy makers to allow the island’s currency to strengthen.
Singapore’s central bank said this month it would undertake a one-time revaluation of the currency and seek its gradual and modest appreciation, joining other Asian nations in tightening monetary policy. The government raised its 2010 growth forecast for the $182 billion economy to as much as 9 percent as the global recovery boosts demand for goods and services.
“March inflation is a precursor of things to come,” Song Seng-Wun, an economist at CIMB-GK Research Pte in Singapore, said before the report. “Stronger-than-expected global demand may push commodity prices including energy much higher than initially projected. The central bank took a view that it should stay ahead of the curve.”
The Monetary Authority of Singapore uses the currency instead of interest rates to conduct monetary policy. It said April 14 it will “re-centre the exchange rate policy band at the prevailing level” of the Singapore dollar, shifting to a stronger range for the currency to trade in. The central bank guides the Singapore dollar against a basket of currencies within an undisclosed band.
The Singapore dollar is the best performing currency in Asia this month, rising 1.9 percent against the U.S. dollar to S$1.3739.
Inflation Forecast
Inflation will probably average between 2.5 percent and 3.5 percent this year, from a previous estimate of as much as 3 percent, the central bank said in an April 14 statement.
“Consumer price inflation has trended higher since the third quarter of last year, largely due to the rise in global commodity prices and private road transport costs,” it said. “These two factors will continue to drive headline inflation rates up for the rest of 2010. Other domestic sources of inflationary pressures, though subdued presently, could be expected to emerge in the coming quarters.”
The strengthening economy may spur wage growth and commercial rentals are likely to rise, the central bank said.
Food prices rose 0.9 percent in March from a year earlier, and transport costs increased 10.1 percent. Housing prices, the biggest component of the consumer price index, slid 0.7 percent.