MAS keeps its policy band unchanged, and the mechanism is worth understanding
Singapore does not set an interest rate. It manages the exchange rate, and that choice explains a great deal about the economy.
The Monetary Authority of Singapore left the slope, width and centre of its currency policy band unchanged at its semi-annual review, matching expectations.
Singapore is unusual among developed economies in conducting monetary policy through the exchange rate rather than through a policy interest rate. Understanding why makes the announcement legible.
Why the exchange rate rather than a rate
Singapore is extraordinarily open. Trade is several times GDP, and a very large share of what is consumed domestically is imported. In an economy of that shape, the exchange rate transmits to domestic prices far more directly and far faster than a policy rate does.
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