The city-state, which uses exchange rates instead of borrowing costs to control inflation, said it would raise the instrument and increase the slope of the real exchange rate zone for the Singapore dollar. While economists expected Singapore to tighten its stance, adjusting both the slope and the midpoint was an unexpectedly aggressive move. It happened as the Singaporean Monetary Authority raised its inflation forecast and made a disappointing note about the prospects for global growth in the wake of the war in Ukraine. Singapore core inflation rose to 2.3 percent year-on-year in January-February, from 1.7 percent in the last quarter of 2021, due to rising energy and food prices. Gross Domestic Product, which was also announced on Thursday, rose 3.4%, slightly losing economists’ forecasts. In light of global price pressures and labor market tightening, the MAS increased its forecast for core inflation by 0.5 percentage points and raised its forecast for inflation for all items by 2 percentage points. Priyanka Kishore, chief economist for India and Southeast Asia at Oxford Economics, forecast a further 5 basis point easing this year, possibly before October, if global inflationary pressures persist. “We expect growth to slow again in the second quarter. “At 3.3% in 2022 and 2.3% in 2023, our growth forecast is below consensus and we expect the output gap to become positive only by the end of 2023,” Kishore said in a statement. “Nevertheless, the risks to growth prospects have shifted further downward amid rising geopolitical uncertainties, rising inflation and downward risks to China due to its continued approach to zero Covid.”
