Letters to Editor
Published Date: 09 June 2008

Response to "Structural Cracks" (The Economist, 24 May 2008)

Dear Editor,

"Structural cracks" (May 24th) contains references to Singapore that are factually incorrect.  First, the Singapore dollar is managed against a trade-weighted basket of currencies of our major trading partners, and is neither managed nor pegged (as is the case in the Hong Kong SAR) to the US dollar.  The trade-weighted Singapore dollar is allowed to fluctuate within a policy band that is consistent with economic fundamentals, with the aim of achieving sustained non-inflationary growth over the medium term.  This has been our monetary policy framework since 1981.  Second, in choosing the exchange rate as the intermediate target of monetary policy - in the context of completely free capital mobility in and out of Singapore - domestic interest rates are determined by market forces and not a result of discretionary policy actions.

Angelina Fernandez
Director (Communications)
Monetary Authority of Singapore