At its latest meeting, Singapore’s central bank, the Monetary Authority of Singapore (MAS), kept its monetary policy unchanged amid uncertainties related to global economic recovery and a tepid outlook for inflation. The announcement came in line with economists’ expectations but helped boost the Singapore dollar after the MAS revealed a surprising growth in the GDP during Q1 2021.

The Q1 GDP improved to 0.2% YoY, going against economists’ expectations for an economic contraction by 0.2% instead. As long as the global economy continues to work its way towards recovery, the MAS expects Singapore’s economy to post a growth towards the higher end of its previously forecast range of 4-6%.

Meanwhile, core inflation is likely to post a gradual recovery through this year and come within 0-1% for 2021. On a slightly positive note, however, the central bank expects headline inflation to now come in between 0.5% and 1.5%, higher than its previous estimated range of -0.5% to 0.5%.

Unlike most other leading central banks, the MAS manages the monetary policy by tweaking exchange rate settings instead of adjusting interest rates. This drives fluctuations in the value of the SGD against the currencies of Singapore’s key trade partners, as trade is one of the most important contributors to the island nation’s economy.