Talk of a twin-track recovery – sluggish in the west, rapid in the east – is becoming a cliché. But it is a reality nonetheless. While the Fed's “extended period” rumbles on, yesterday's semi-annual currency review at the Monetary Authority of Singapore confirmed that some Asian central banks have begun to shift decisively from stimulating growth to fighting inflation.
In seeking “a modest and gradual appreciation” of the local dollar, while shifting upwards the range in which the currency fluctuates, Singapore joins Australia and Malaysia in the front rank of policy-tighteners. More significant, though, is the fact that this is the first such combined move in MAS's 39-year history – a reaction to the simultaneous release of data suggesting that first-quarter gross domestic product grew by a record annualised rate of 32 per cent.
An over-reaction? Possibly. MAS's outlook statement, revising full-year growth estimates from 6.5 per cent to 9 per cent, certainly takes a lot for granted: that domestic demand will be sustained at a “relatively high level”, and that external demand will remain “supportive”. And while the estimated GDP for the first quarter looks exceptionally strong, it is a reflection of low base effects. Inflation is rising – consumer prices were up 1 per cent in February, from a year earlier – but is hardly approaching the panic zone.