SINGAPORE (AP) — Singapore will allow its currency to strengthen in a bid to ease inflationary pressures sparked by rising global energy and food costs, the central bank said Thursday.
The Monetary Authority of Singapore said in a biannual policy statement that it will re–center its exchange rate policy band upward while leaving the slope and width of the band unchanged.
“Global oil and food prices have increased and will remain high,” the bank said. “Headline inflation is forecast to stay elevated. Domestic cost and price pressures will remain firm.”
Central bankers across Asia have tightened monetary policy this year, mostly through higher interest rates, as soaring commodity prices threaten to spark inflation.
The Singaporean dollar has gained about 2 percent so far this year to a record SG$1.25 per U.S. dollar after strengthening 9.3 percent last year. Singapore’s central bank uses its currency exchange rate policy, rather than interest rates, to regulate monetary liquidity and inflation.
The central bank left unchanged its 2011 inflation forecast of between 3 percent and 4 percent. Consumer prices rose 5 percent in the 12 months through February.
Strong economic growth in the first quarter also pushed the bank to boost its currency. Policymakers have said recently that they will use a stronger Singaporean dollar to combat inflation, but don’t want to strengthen the currency too much because that could undermine the city–state’s export competitiveness.
Gross domestic product jumped a seasonally adjusted annualized 24 percent in the January–to–March period from the previous quarter, the Trade and Industry Ministry said separately Thursday. Manufacturing surged 80 percent, construction gained 15 percent and services increased 8.4 percent, the ministry said.
The economy grew a seasonally adjusted annualized 3.9 percent in the fourth quarter.
Compared with the same period a year earlier, the economy grew 8.5 percent in the first quarter after expanding 12 percent in the fourth, the ministry said.
The central bank said the economy will likely grow this year “at the upper end” of the government’s forecast of between 4 percent and 6 percent.