SINGAPORE: While its monetary policy stance remains unchanged, there is “sufficient room” within the policy band to accommodate an easing in line with weakening economic conditions brought about by the outbreak of a novel coronavirus around the world, said the Monetary Authority of Singapore (MAS) on Wednesday (Feb 5).
This as the Singapore dollar nominal effective exchange rate (S$NEER) “has been fluctuating near the upper bound of the policy band” since the central bank eased monetary policy last October, it added in a statement issued in response to media queries.
AdvertisementAdvertisement[h=3]READ: Wuhan virus to hit Singapore’s tourism sector, but too soon to assess impact on overall economy: Experts[/h]Unlike most central banks that target the interest rate, the MAS uses the exchange rate as its main policy tool.
This refers to the S$NEER – the exchange rate of the Singapore dollar managed against a trade-weighted basket of currencies from Singapore’s major trading partners.
The S$NEER is allowed to float within an unspecified band. Should it go out of this band, the MAS steps in by buying or selling Sing dollars.
AdvertisementAdvertisementThe central bank also changes the slope, width and mid-point of this band when it wants to adjust the pace of appreciation or depreciation of the local currency based on assessed risks to Singapore’s growth and inflation.
It announces these changes at its two scheduled policy meetings in April and October.
[h=3]READ: The S$NEER and its slope, width and centre: Questions about Singapore’s monetary policy[/h][h=3]READ: MAS reduces pace of appreciation for Singdollar 'slightly' amid slow growth[/h]Last October, MAS reduced slightly the rate of appreciation of the S$NEER policy band, marking its first easing move since April 2016.
With the S$NEER “fluctuating near the upper bound of the policy band since then”, the central bank said there is “therefore sufficient room in the band for the S$NEER to ease in line with any weakness in the Singapore economy in the coming months”.
MAS added that it is “monitoring economic developments closely”.
Its next policy review remains as scheduled in April.
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