Singapore tightens monetary policy on GDP growth and rising inflation

Singapore's GDP grew by 6.5% in the third quarter compared with a year ago, prompting the Monetary Authority of Singapore (MAS), the country’s central bank to tighten monetary policy on Thursday via setting the exchange rate. MAS said it raised the slope of its currency band “slightly” from the previous 0% rate of appreciation per annum. That means the Singapore dollar is allowed to appreciate against a basket of currencies within an undisclosed band.

The MAS manages monetary policy through setting the exchange rate, rather than interest rates. The reasoning behind this approach is that, in a small and open economy such as Singapore, where gross exports and imports of goods and services are more than 300% of GDP and almost 40 cents of every dollar spent domestically is on imports, the exchange rate has a much stronger influence on inflation than the interest rate.

Singapore's economy is expected to rebound further in the next few quarters as the government eases the pandemic restrictions and opens up international travel. ETF investors can gain access the heating Singaporean economy through SPDR Straits Times Index ETF (ES3), iShares MSCI Singapore ETF (ISV0) and Nikko AM Singapore STI ETF, three of the largest Singaporean equity ETFs.

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