MAS maintains exchange policy and reports record profits

SINGAPORE, (July 29, 2010) - The Monetary Authority of Singapore which just reported record profits for last year said its current policy of allowing the Singapore currency to gradually appreciate remains appropriate, meaning its monetary policy remained unchanged from April.

Speaking at the release of MAS annual report today, the central bank’s managing director Heng Swee Kiat said while inflation is expected to pick up towards the latter part of the year, it has evolved broadly as anticipated during the April review.

“At this stage, we assess that the current monetary policy stance of a modest and gradual appreciation of the S$NEER policy band remains appropriate. ‘’

Mr Heng said when Singapore entered the recession in 2008, monetary policy, followed by fiscal policy, was eased to provide support to the domestic economy. As economic activity recovered swiftly in 2009, macroeconomic policy settings were recalibrated to levels which were conducive to sustainable growth and medium-term price stability.

In a pre-emptive move, MAS tightened monetary policy in April 2010 by re-centring the S$NEER policy band upwards and restoring its modest and gradual appreciation path. "MAS will continue to be vigilant and take appropriate steps to maintain medium-term price stability and enhance the resilience of our financial system," Mr Heng said.

With its highly open economy, Singapore uses its exchange rate to moderate money supply and inflation as against interest rate policy used by other countries like USA and Japan.

MAS also announced that it will start selling three-month MAS Bills from the second quarter of 2011. This new type of security, issued by the central bank itself and not the government, will help the MAS conduct money-market operations and boost availability of liquid assets in the banking system.

MAS will increase the availability of liquid securities by selling short-term MAS bills, initially worth S$20 billion next year, Mr Heng said. The issuances will be increased later depending on the MAS' sterilization requirements, which are affected by exogenous factors such as capital inflows into the region.
With the recover of the global economies, MAS also reported a healthy growth in profitability.

Reflecting the upturn in the global financial markets. the central bank reported a net profit of $10.12 billion last year - its highest ever - reversing a $9.2 billion loss the year before. The MAS, which manages a portion of Singapore's reserves, transferred $3.38 billion of its profits to the Singapore reserves in addition to $160 million to the Government's Consolidated Fund.

On the recent breaksdown of DBS computer system, MAS says it is in dialogue with the bank on investigations into the seven-hour outage that disrupted banking and ATM services at DBS and POSB on July 5.

More than 1,000 ATM machines as well as some branch services were affected by the disruption.

MAS said it will assess the outcome of the investigation before deciding on the appropriate regulatory action to take.