Sufficiency of Exchange Rate, Fiscal and Macroprudential Measures to Contain Rising Cost of Living

Mr Saktiandi Supaat asked the Prime Minister (a) what is the Government's assessment on the sufficiency of our exchange rate, and fiscal and macroprudential measures to contain the rising cost of living for Singaporeans; and (b) what other tools remain for us to deploy should the rise in inflation and interest rates continue unabated.

The Government's approach to addressing inflation and its effects on households has been multi-pronged. Tighter monetary policy has dampened imported inflation, while targeted fiscal and credit support have assisted vulnerable Singaporeans to cope with the rise in the cost of living and attendant cash flow pressures.

The Monetary Authority of Singapore (MAS) estimates that its monetary policy moves since October 2021 will restrain core inflation by an average of 1.2 percentage points each year over 2022 to 2023. In other words, had MAS not adjusted monetary policy, core inflation would be on average 30% higher.

Given the sharp increase in global food and energy prices, it is not possible or judicious for monetary policy to completely offset their effects. Central banks in other countries will similarly not be able to completely offset this surge in global prices in the near term. The International Monetary Fund expects world inflation to reach 8.3% this year.

This is where the Government's fiscal support, to cushion the impact of inflation on middle- and lower-income families, comes in. The Deputy Prime Minister and Minister for Finance had in July in Parliament highlighted the scale of the Government's support and addressed questions on the same.

Besides rising prices, rising interest rates also impact Singaporeans. Domestic interest rates are likely to increase further in tandem with global interest rates. This will affect borrowing costs for home purchases. As Members know, MAS and the Housing and Development Board (HDB) have just taken steps to prevent excessive borrowing for home purchases.

There is considerable uncertainty over global economic and financial developments. This affects countries all over the world, including Singapore. The Government and MAS will continue to deploy fiscal, monetary and macroprudential measures as appropriate, to ease inflationary pressures and help cushion the impact of rising prices on Singaporeans.