What the Reduction of the Singapore Appreciation Rate Means? Different central banks around the world use various strategies to control the rate of inflation in their respective countries. Some governments prefer to use the instrument of interest rates to tame inflation. However, the Monetary Authority of Singapore prefers to use the control of the exchange rate of the Sing dollar currency against other major world currencies to stabilize prices of goods and services in the country.
The Singapore Dollar Nominal Effective Exchange Rate (S$NEER) can be described as the exchange rate between the Sing dollar and the currencies of other countries who are major trading partners of Singapore.
The Monetary Authority of Singapore routinely reviews the Singapore Dollar Nominal Effective Exchange rate policy band twice a year, in April and October. This is done primarily to control the rate of inflation and to ensure the stability of the prices of goods and services in Singapore for a season of time.
The Central Bank in Singapore has recently made a move to slightly reduce the appreciation rate of the Singapore Nominal Effective Exchange Rate policy band. However, the width band of the policy will not change. Financial experts say that this move was expected, considering the challenging current economic situation in Singapore. This reduction has been done mainly for the following reasons.
Once the prices of goods and services in the country have stabilized, it is expected that the economy of Singapore will continue to grow steadily. With the recent move to reduce the appreciation rate of the Singapore Dollar, the rate of core inflation is expected to remain subdued for a period of time.
This move to reduce the appreciation rate of the Sing dollar is not expected to have any direct effect on ordinary Singaporeans. However, the effect of the negative global economic conditions should be a major concern for most Singaporeans. This is because the decline of major global economies will have a negative impact on the economy of Singapore. This could lead to loss of businesses as well as loss of jobs.
The following are some of the challenges that may be experienced while implementing this strategy.
In conclusion, if Singapore’s economic situation does not improve after implementing this strategy, the Singapore government will need to come up with other fiscal policies to salvage the situation.
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