To tighten or not: Economists split on upcoming MAS policy decision amid trade risks
While rising inflation makes the case for tighter monetary policy, economists say the cycle of retaliatory tariffs between the world’s two biggest economies may prompt the central bank to stand pat.
Read more at https://www.channelnewsasia.com/news/business/to-tighten-or-not-economists-split-on-upcoming-mas-policy-10740638
Very interesting and strange comments that MAS as Central Bank should not intervene in the free market.
Central Banks all over the World are created to :- (1) manage the respective money supply in the respective Countries. (2) manage the monetary policy of the Country. (3) manage the interest rate of the Country - in tandem with the health of the Economy like controlling inflation and deflation. (4) manage the exchange rate of the currency with foreign currencies - to ensure stability in the World financial system to allow trade to take place and many other financial functions.
So it is a very strange statement asking for a Central bank not to intervene in a free market - wonder those people who make such comments know how the World economic system and financial system operates or not?
There are 2 main economic tools - that Government and Economists must used to ensure Economic Growth in a Country. (1) Monetary Policy - whereby MAS (a Central Bank) play an important role to manage the exchange rate and/or interest rate to control its money supply.
(2) Fiscal Policy - whereby the Government will manage tax and government spendings to ensure economic growth.
All Countries eg. US will through FED will have to manage its interest rate to control inflation and fuel growth. Obama with hostile Congress cannot use fiscal policy to bring about a recovery to US Economy when it enter into a deep recession - and rely solely on FED monetary policy managing its interest rate and quantitative easing to turnaround US economy.
Countries such as Indonesia and India need to intervene through its Central Bank - to prop out its currency to prevent a free fall - and hurt its economic growth due to high import price.
So wonder how people can say MAS should not intervene in a free market? Then what is the purpose of having a Central Bank?
For eg. during the sub-prime crisis - US economy is in a deep shit - went into a Deep Recession.
To fuel the Economy, Obama through FED did a quantitative easing - by buying up treasury bills and securities from all the US commercial banks - and increase the credit to all the US commercial banks - and thus increase the money supply to the banks (similar effects to "printing money"). $4 trillion US dollars was created for the US financial market - to enable banks to lend to US business and consumers - to help US emerge from the Deep Recession.
With now the US Economy expanding through Obama Expansion Monetary Policy - Trump further create a bigger bubble to the US economy by adopting expansionary fiscal policy of a big tax cut and big spending in military, border walls etc --- that cause US Economy to start overheating.
Thus US FED has to cool the Economy by increasing interest rate - adopting a contraction monetary policy - as a higher FED rate will means banks will need to keep more money as reserve requirement - and reduce business and consumer borrowings.
MAS have to do similar thing - like specifying reserve requirement ratio for banks, determining the amount of money needed by the Economy, instead of determining interest rate - focus on trade-weighted exchange currency - as Singapore's trade is 3 times the size of domestic economy and thus cannot focus on interest rate.
So how can MAS not intervene in the free market? Then how do Singapore financial system, trade and Economy works?
CNA should pat yourselves on your back that your website provide a commenting feature which other news websites do not provide. You need to learn how to respect freedom of speech in Sgp by not censoring comments.
In the first place MAS is not suppose to intervene in free market. Market manipulation would give wrong signal to all market participants and ultimately, leading to malinvestments. MAS is not truely an independent entity. So unfortunately, to tighten or not is more of a political question rather than a economic question. To artificially inflate and "grow" the economy, MAS on the direction of the PAP will continue to let Sing dollar depreciate against major currencies. Caution to all savers and retirees, your purchasing power would likely decrease causing you to lose wealth.
Ben, this gov intervene in every thing in Singapore. Dont get fooled by what they say, watch what they do. If they do no intervene .....they would have nothing to do. However to be fair....it is not all the gov fault. The sheeple expect and look to the gov to intervene .....even when it is their own family affiars.
Obviously they would likely to tighten. However reality is that EM market currencies and our major trading partners have their currencies depreciated. Sing dallor must go down to remain competitive for it exports.
Mas shoudl look into it carefully. thsoe war will only keep bringing down all thsoe who in the ASME business. MAS should also look into it the apst few years in the unsecurit loan issue from 24% drop into 18% .. so many SMEs owner due to this arae many of them get inot big problem by needed to top up back the 6% .. look at present time now .. all ECY is badly hit by the work of 2 giant for the game, Mas should possible to put it back to 20% let those SME business peoples to a small area to breath a little more ... Please .. look into it .. befor many SME company closing down soon by end year 2018 ...
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