SINGAPORE (April 12): Singapore's central bank is expected to tighten monetary policy as global inflation sweeps into the city state, fuelled by geopolitical and supply-chain tensions and as US Federal Reserve (Fed) officials remove Covid-19-era support.

The Monetary Authority of Singapore (MAS), which uses the exchange rate rather than interest rates to stabilise prices, will signal on Thursday that it is seeking a stronger local dollar to buffer imported inflation, according to all 16 economists surveyed by Bloomberg.

While a predicted tightening at the April meeting was unanimous, economists were divided on which of the three currency band tools the MAS will use.

All but one of the respondents expected the central bank to raise the slope of its policy band, a move that gradually strengthens the Singapore dollar against trading partners. Half expected the entire band would be moved higher — known as recentering — which is a more sudden and sharp effort to boost the currency.

Lastly, three predicted policymakers would widen the band within which it guides the currency, allowing the local dollar greater scope to swing from the baseline policy goal. Only two of 16 respondents expected the MAS to use all three tools.

Central banks around the world led by the Fed are raising interest rates to combat inflation amid risks from Russia's invasion of Ukraine and worsening supply-chain disruptions. Singapore, which began tightening policy late last year and followed through with a rare out-of-turn move in January, is experiencing price growth well above the 2.5%-3.5% range forecast this year, even as the economy's recovery from Covid-19 is on track.

"Tightening resource pressures in the economy and upside inflation risks mean the MAS has to be more forceful in normalising monetary policy," said Khoon Goh, Singapore-based head of Asia research for Australia & New Zealand Banking Group Ltd, who sees the authority tightening "aggressively" by recentering and steepening the slope on Thursday.

Here is what else to watch for in the MAS statement:

Inflation outlook

Closely watched will be any tweaks to MAS' forecast for price growth this year. Besides the 2.5%-3.5% overall inflation projection in January, the authority then saw core inflation averaging 2%-3% in 2022.

Singapore's economy is in better shape than some emerging markets in Asia whose growth recoveries are more fragile, complicating policymakers' timeline for combating soaring inflation through rate hikes. So far in 2022, Indonesia, Thailand, Malaysia, and the Philippines have each held their benchmark rates while acknowledging rising prices.

India has signalled a hawkish turn in response to soaring prices, and China's higher-than-expected inflation prints could prompt policy action soon.

Exiting pandemic

First-quarter advance estimates of Singapore's gross domestic product growth, also due Thursday morning from the Ministry of Trade and Industry, will help illustrate the city state's health as fresh domestic and border reopening measures took effect.

The MAS most recently projected the economy would expand 3%-5% this year after it grew 7.6% last year.

Even as Singapore begins to shake off Covid-19-era restrictions, officials have warned that the healing could be gradual, including in tourism-related sectors that face labour shortages as foreign workers trickle back. The Covid-19-induced dearth of overseas workers should ease over the next few months, Finance Minister Lawrence Wong said at the start of March.