People cross Robinson Road in the financial business district in Singapore on Aug 16, 2021. (Roslan RAHMAN / AFP)

SINGAPORE - Singapore's central bank tightened its monetary policy on Tuesday in its first out-of-cycle move in seven years as inflationary pressures driven by global supply constraints build up in the region.

The Monetary Authority of Singapore said in its latest monetary policy statement that it will raise slightly the rate of appreciation of the Singapore dollar Nominal Effective Exchange Rate policy band, while the width of the policy band and the level at which it is centered will be unchanged.

The Monetary Authority of Singapore said in its latest monetary policy statement that it will raise slightly the rate of appreciation of the Singapore dollar Nominal Effective Exchange Rate policy band, while the width of the policy band and the level at which it is centered will be unchanged

This move builds on the pre-emptive shift to an appreciating stance in October 2021 and is appropriate for ensuring medium-term price stability, it added.

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The central bank said that the Singapore economy remains on track to grow at a creditable pace of 3 to 5 percent this year, and the output gap is expected to turn slightly positive.

The authority forecasts that the MAS Core Inflation will be higher in the near term in view of rapidly accumulating external and domestic cost pressures, and could reach 3 percent by the middle of this year before moderating.

"While core inflation is expected to moderate in the second half of the year from the elevated levels in the first half as supply constraints ease, the risks remain skewed to the upside," it added.

The central bank said that it is revising its inflation forecasts for 2022. MAS Core Inflation is now projected to be 2.0-3.0 percent this year, from the 1.0-2.0 percent expected in October 2021. Meanwhile, CPI-All Items inflation is expected to be 2.5-3.5 percent, from the earlier forecast range of 1.5-2.5 percent.

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Singapore's MAS Core Inflation excludes the costs of accommodation and private transport, and CPI-All Items inflation represents the rise in consumer price index for all items.

MAS usually publishes the bi-annual monetary policy statements in April and October. The last time the authority published this statement in an off-cycle move was in January 2015.