Banking crisis in US, Europe has no direct impact on Singapore’s monetary policy: Alvin Tan

NEAR-TERM shocks – such as the ongoing banking crisis in the US and Europe – have no direct impact on Singapore’s monetary policy, which is focused on the medium term, said Minister of State for Trade and Industry Alvin Tan in Parliament on Monday (Mar 20).

In the run up to its scheduled review in April, the Monetary Authority of Singapore (MAS) will take into account the implications of current global and domestic economic developments for inflation and growth, said Tan.

But he added: “By themselves, near-term shocks such as the recent developments in the international banking industry would not have direct implications for the long-term path of inflation and the Singapore dollar nominal effective exchange rate.”

Rather, the long-term path of global, regional and domestic inflation is affected by factors such as demographics, technological advances that impact productivity, future trends in globalisation, and central banks’ commitment to low and stable inflation, added Tan, who is also an MAS board member.

Responding to MP Saktiandi Supaat, who asked how the recent financial sector developments might affect inflation and Singapore’s financial sector, Tan stressed that Singapore’s banking system remains “sound and resilient”.

The Singapore dollar money market continues to function well, and the banking system here has insignificant exposures to the failed banks in the US as well as Credit Suisse, he said.

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MAS will keep monitoring the domestic financial system and international developments, and “stands ready to provide liquidity through a suite of facilities to ensure that Singapore’s financial system remains stable and financial markets continue to function in an orderly manner”, said Tan.