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Singapore: Inflation in Singapore is expected to temporarily turn negative in some parts of 2009 but overall, it is forecast to stay unchanged at -1% to 0%.
The Monetary Authority of Singapore also said Tuesday that from January and February 2009, inflation slowed significantly to 2.4% year-on-year from 5.4% seen in Q4 2008.
Going forward, it expects inflation to continue to move downards, reflecting a combination of lower commodity prices and increased slack in the domestic economy.
In view of this as well as a lowered economic growth projection of between -9% and -6%, the MAS said there is no reason for any undue weakening of the Singapore dollar.
However the MAS which acts as Singapore's central bank said in a statement that it will re-centre the exchange rate policy band of the prevailing level of the S$NEER, the Nominal Effective Exchange Rate (S$NEER) while keeping the zero percent appreciation path. The width of the band will remain unchanged.
Analysts said that by shifting the secret trade-weighted trading band for the Singapore dollar, the MAS has effectively carried out a one-off devaluation.
The easing of the monetary policy for the second time since 2003, was expected by most analysts to cushion the economy from the worst global financial crisis in decades.
In response, the Singapore dollar rose against the U.S. dollar in early trade rising more than a percent from Monday's 1.5160 close.
- CNA/sf
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