Singapore tightens monetary policy on inflation risks

Singapore's central bank tightened its monetary policy settings on Tuesday in its first out-of-cycle move in seven years, as global supply constraints and brisk economic demand elevate inflation pressures across the region.

The city-state's trade-dependent economy is highly susceptible to swings in global inflation and the central bank's sudden move comes as price pressures ring alarm bells for policymakers elsewhere in Asia.

Selena Ling, head of treasury research and strategy at OCBC, said she expects the central bank to tighten again in April, describing Tuesday's move as only a  "slight tightening."

 "If they had announced a more aggressive tightening today, then that would have dampened expectations for April," she said.

The Monetary Authority of Singapore (MAS), which manages monetary policy through exchange rate settings, said it would slightly raise the rate of appreciation of its policy band.

The width of the band, known as the Nominal Effective Exchange Rate, or S$NEER, and the level at which it is centered will be unchanged.

The MAS, which typically holds scheduled policy reviews twice a year, once in April and then in October, last surprised with an off-cycle move in January 2015 when it eased its policy after a collapse in global oil prices.

Last year, many Asia-Pacific economies largely shrugged off inflationary threats that had rattled policymakers in Europe and the United States but that thinking now appears to be shifting.

Australia's core inflation flew to its fastest annual pace since 2014 in the December quarter, data showed on Tuesday, challenging the central bank's benign interest rate outlook.

In Japan, a country renowned for its stubbornly tepid price growth, policymakers have also acknowledged creeping inflation pressures.

Elsewhere, investors expect the US Federal Reserve to raise its benchmark interest rate in March with the central bank likely to step up its rhetoric against inflation at its meeting this week.