International Herald Tribune
16 Apr 2008
When Singapore announced a somewhat unusual monetary tightening measure last week, economists praised a move that they felt tackled soaring inflation and made up for an overdue policy adjustment in one stroke.
But, as the dust settles, market participants are increasingly worried about the side effects of what was effectively a revaluation of the currency and the pitfalls of the peculiar Singaporean policy settings.
Critics argue that by endorsing an appreciating trend in the Singapore dollar, the central bank is opening the door to more capital inflows and more cash in the local market.
The result could be downward pressure on domestic interest rates and so more inflationary pressure.
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