Using Negative Rates to Fight Inflation ! SINGAPORE STYLE
A picture says a thousand words.
Today’s policy decision brings us a stronger SGD, so rejoice on your holidays abroad.
Did QE bring all that inflation on shore ? Or was it the USD/SGD appreciation policy which is encouraging more inflows than we need ? Or is it a chicken and egg thing ?
An economist told me not to ask stupid questions when I asked why inflation is still so high over here when our currency is stronger than ever ? Even Switzerland has got their inflation under control.
Well, the economist says that a layman has no business in understanding the mechanics of an exchange rate policy even if I am a citizen of the country. That local prices can be controlled by just controlling the import and export price components. Domestically generated inflation will eventually be contained and so will asset inflation bubbles.
Apparently all central banks prefer their citizens, whom they work for, to be in the dark.
Case closed.
Well, back to the point. What are the components of inflation that we are measuring? I am no economist but according to Singstat, transport and housing are substantial components.
http://www.singstat.gov.sg/educorner/cpi.html#cpicover
Being just a common man on the street tells me 2 things. COE prices are sky-rocketing. Secondly, foreigners have eased off their property buying spree due to the recent measures but the housing craze is still ongoing among the locals. To these factors, I can’t see how a stronger SGD helps with inflation. Singaporeans have themselves to blame for inflation =). Being Kiasu, everyone is afraid that COE would run dry and left homeless. There’s somewhat of a feedback loop here since higher prices on the above lead to higher demand on wages…. and pretty much higher prices on everything.
The irony in these is that a strong SGD has caused lower rates here, which make both cars and homes more affordable as well. Case in point would be cars, due to the low rates, total cost of car ownership is not as expensive as it seems. What you would have previously spent on loans is now spent on COE. Also, with Singaporean’s supposedly soon to be more “productive” would a stronger SGD have an impact on our competitiveness? Is SGD still a valid monetary tool…
Oh well, until the music stops…
Very good points !
I suppose everyone is feeling rich here these days or just trying to keep up with the Jones. Anyway, the mentality is “If Greece can do it, so can I !” Cannot pay, blame the government.
COE is going to go higher because they need to remove at least 1000 cars from the roads to make way for the 800 buses that are coming online soon.
The economist says it’s a 10 year plan. That bus drivers get richer in the process. But he voted for for Opposition. Weirdo. Meanwhile 4,800 sq ft in Moonbeam, 3 sold already, for 6.7 mio.
Oh please ??
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