Claire Jones

Nobody is quite sure yet what does and doesn’t count as macroprudential policy. But, given it’s seen as a force for good, central bankers are keen to pin the tag on as much of what they do as possible. Once the hype fades, though, it is unlikely to displace interest rates as their most important tool.

A key, perhaps even the question for policymakers, then, is how monetary policy and macroprudential policy can best interact.

According to research from Standard Chartered’s Natalia Lechmanova, which looks at the lessons that can be learnt from how Asian policymakers have used macroprudential tools such as loan-to-value ratios, the two policy strands are most effective when they are combined. Read more

The Singapore dollar jumped to a record level against the US dollar on Thursday after the island state tightened monetary policy for the second time in six months to combat rising inflation. Economists said the move was likely to be followed by a round of interest rate rises across Asia as governments sought to curb inflation generated by rapid economic growth in the region and loose monetary policy in the west.

Singapore, which conducts its monetary policy through changes to the exchange rate, rather than through interest rates, said it was responding to faster than expected economic growth and a fall in commercial interest rates triggered by abundant global liquidity. The Monetary Authority of Singapore, the country’s central bank, said it had shifted its exchange rate policy band upwards to below the prevailing level of the Singapore dollar’s nominal effective exchange rate. Read more

Singapore’s central bank surprised global markets by tightening monetary policy as the government announced a 20 per cent contraction in economic growth in the third quarter.

The Singapore dollar hit a new high of $1.2826 against the US dollar after the Monetary Authority of Singapore on Thursday said it had widened the currency’s secret trading band against a basket of currencies. The MAS said it had also “slightly” increased the pace at which it will allow the domestic currency to appreciate. Read more

The central bank of China and monetary authority of Singapore have agreed a three-year currency swap valued at 150 billion yuan ($22.1bn), the People’s Bank of China announced today:

“In order to promote bilateral trade and direct investments, Bank of China and the Monetary Authority of Singapore on July 23, 2010 in Beijing signed a bilateral currency swap agreements. The size of the swap agreement for the 150 billion yuan / about 30 billion Singapore dollars. Agreement has a term of 3 years may be extended by mutual agreement.” (translated from the original using Google translate, h/t Bloomberg)

The Singaporean dollar will be allowed gradually to appreciate following a one-off strengthening today that a Bloomberg source estimates at about 0.6 per cent. At the same time, the Trade and Industry ministry raised its forecast for this year’s growth to 7-9 per cent, from 4.5-6.5 per cent.

The local dollar will trade in a new, stronger band, the midpoint of which is roughly the top of the previous band. There will be no change to the width of the band. The dollar is measured against a trade-weighted index of large international currencies, in proprortions held secret by the country’s Monetary Authority. Read more