Need to ensure medium-term price stability in economy: Singapore's central bank

Singapore's central bank new policy stance to ease its monetary policy is seen "appropriate for ensuring medium-term price stability in the economy, a spokesperson said on Wednesday.

Earlier, the Monetary Authority of Singapore (MAS) announced that it would maintain the policy of a modest and gradual appreciation of the SGD NEER policy band, but the slope of the band would be reduced.

Following the shock announcement, the Singapore dollar sank to its weakest level since 2010, sinking as much as 1.3 percent to S$1.3569 against the greenback.

The new policy stance took into account the latest data and forecasts of relevant external and domestic factors.

"Specifically, the outlook for inflation has shifted significantly since October last year, while the economy is expected to continue growing at a moderate pace in 2015.''

"Our next monetary policy review will be as scheduled in April, when we will reassess the prospects for growth and inflation, taking into account the latest external and domestic economic indicators. Barring significant shocks, the inflation and growth forecasts for 2015 would likely be reaffirmed,'' the spokesperson said.

MAS has also cut its inflation forecasts for 2015, as imported inflationary pressures are receding and global oil prices are likely to stay subdued this year after falling sharply since its last monetary policy statement in October.

CPI-All Items inflation is now projected to come in at -0.5-0.5 per cent, from the 0.5-1.5 per cent expected in October. MAS Core Inflation is expected to be 0.5-1.5 per cent this year, down from the earlier forecast range of 2-3 per cent.

MAS left intact its 2015 growth forecast for the Singapore economy at 2-4 per cent.