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Singapore's monetary policy

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Singapore's monetary policy is to maintain price stability for sustained economic growth. Since 1981, monetary policy in Singapore has been centred on the exchange rate. This reflects the fact that in the small and open Singapore economy where imports and exports amount to more than twice GDP, the exchange rate is the most effective tool in controlling inflation.

The MAS manages the Singapore dollar (S$) exchange rate against a trade-weighted basket of currencies of Singapore's major trading partners and competitors. The composition of this basket is reviewed and revised periodically to take into account changes in Singapore's trade patterns. This trade-weighted exchange rate is maintained broadly within an undisclosed target band, and is allowed to appreciate or depreciate depending on factors such as the level of world inflation and domestic price pressures. MAS may also intervene in the foreign exchange market to prevent excessive fluctuations in the S$ exchange rate.