Singapore has unexpectedly tightened monetary policy to join the global fight against accelerating inflation, sending its currency to the strongest since October last year.
The Monetary Authority of Singapore (MAS), which uses foreign exchange as its main policy tool, made its first unscheduled action since 2015 yesterday, a day after the government flagged uncertainty over its inflation outlook as consumer prices rose the fastest in eight years.
Given the continued inflation risks, economists expect further action at its next meeting in April.
Photo: Bloomberg
In a statement, the MAS signaled that it was allowing the local currency to appreciate against its peers in the months ahead to counter imported cost pressures.
In technical terms, it would “raise slightly the rate of appreciation” of its main currency band, while keeping its width and center unchanged.
The Singapore dollar closed 0.2 percent higher at 1.3437 to the US dollar yesterday.
The city-state, which relies heavily on imports, had already taken steps toward tightening in October, when it unexpectedly raised the appreciation path of the currency band.
The MAS yesterday said that inflation has shifted higher since that decision, and that “pandemic-related and geopolitical shocks” pose risks for further increases.
The central bank also raised its inflation forecasts for this year, projecting core prices to rise 2 to 3 percent, from its October forecast of 1 to 2 percent.
“While core inflation is expected to moderate in the second half of the year from the elevated levels in the first half as supply constraints ease, the risks remain skewed to the upside,” the MAS said.
Further tightening is possible in the MAS’ April announcement, economists at Oversea-Chinese Banking Corp (OCBC) and Bank of America Corp said.
“The key determinant would be whether core inflation peaks at the 3 percent handle and stabilizes, or if private consumption remains very buoyant to drive car and accommodation prices higher,” said Selena Ling (林秀心), head of treasury research and strategy at OCBC in Singapore.
She added that there could be further pressure from coming domestic fee adjustments and imported inflation.
Singapore’s economic recovery is expected to extend to domestic-focused and travel-related areas this year as pandemic restrictions are eased, the MAS said.
The economy is on track to grow 3 percent to 5 percent this year, the central bank added, reiterating a government forecast in November.
ARTIFICIAL INTELLIGENCE: The chipmaker last month raised its capital spending by 28 percent for this year to NT$32 billion from a previous estimate of NT$25 billion Contract chipmaker Powerchip Semiconductor Manufacturing Corp (力積電子) yesterday launched a new 12-inch fab, tapping into advanced chip-on-wafer-on-substrate (CoWoS) packaging technology to support rising demand for artificial intelligence (AI) devices. Powerchip is to offer interposers, one of three parts in CoWoS packaging technology, with shipments scheduled for the second half of this year, Powerchip chairman Frank Huang (黃崇仁) told reporters on the sidelines of a fab inauguration ceremony in the Tongluo Science Park (銅鑼科學園區) in Miaoli County yesterday. “We are working with customers to supply CoWoS-related business, utilizing part of this new fab’s capacity,” Huang said, adding that Powerchip intended to bridge
Microsoft Corp yesterday said that it would create Thailand’s first data center region to boost cloud and artificial intelligence (AI) infrastructure, promising AI training to more than 100,000 people to develop tech. Bangkok is a key economic player in Southeast Asia, but it has lagged behind Indonesia and Singapore when it comes to the tech industry. Thailand has an “incredible opportunity to build a digital-first, AI-powered future,” Microsoft chairman and chief executive officer Satya Nadella said at an event in Bangkok. Data center regions are physical locations that store computing infrastructure, allowing secure and reliable access to cloud platforms. The global embrace of AI
RIDING AI WAVE: : Most of its NT$15bn capital budget would be spent on packaging technologies used in AI and HPC chips and advanced testing technology, it said Chip testing and packaging service provider Powertech Technology Inc (PTI, 力成科技) plans to increase this year’s capital expenditure by 50 percent to expand capacity to meet growing demand for advanced memorychips used in artificial intelligence (AI) products. The company proposed to spend NT$15 billion (US$460.94 million) to expand advanced capacity and equipment, compared with a budget of NT$10 billion it planned three months ago. “We are seeing a recovery in market demand as well as new business opportunities. We will spend heavily on advanced packaging” equipment, Powertech chief executive officer Boris Hsieh (謝永達) told investors on Tuesday. “We will focus on ramping
INFLATION WATCH: A rate hike in March would help keep inflation at 2.16 percent this year, although a weak currency and higher electricity rates are an issue, S&P said Moody’s Ratings and S&P Global Ratings have reaffirmed Taiwan’s sovereign credit ratings at “As3” and “AA+” respectively with a stable outlook on the back of high income and wealth levels, a strong institutional framework and robust external positions. The affirmations came as Taiwan’s economy is gaining momentum after quarters of slowdown induced by stubborn global inflation and monetary tightening. Taiwan’s strong fiscal and external buffers have improved relative to peers as evidenced by recent shocks linked to the COVID-19 pandemic and the ongoing US-China technology dispute, the two ratings firms said. “Taiwan stands as the epicenter of the global semiconductor supply chain, accounting