Singapore's central bank said Monday it will allow the local dollar to gradually appreciate further to support the economy's growth momentum in a shift from its neutral policy stance.
The Monetary Authority of Singapore (MAS) announced its more tolerant approach to the Singapore dollar after the release of government data showed gross domestic product (GDP) grew an annual 7.3 percent in the first quarter.
"Against a more favourable growth outlook for the Singapore economy and the risk of inflationary pressures, MAS is shifting from a zero percent appreciation path to a policy of modest and gradual appreciation," the MAS said in its bi-annual policy statement.
"This policy stance will be supportive of economic growth, while ensuring low and stable inflation over the medium-term."
For 2004, inflation is expected to creep up from 0.5-1.5 percent to 1.5-2.0 percent, the MAS statement added.
The MAS manages the Singapore dollar against a basket of currencies of its major trading partners such as the United States, Europe and Japan within an undisclosed trading band.
In Monday's statement, the MAS said the Singapore dollar Nominal Effective Exchange Rate had appreciated towards the upper end of the policy band on the back of strong economic data in recent months.
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