To keep the $ within its policy band, MAS had to intervene in the foreign exchange markets to mop up these large and persistent capital inflows. In the process, MAS accumulated a large stock of OFR. MAS’ foreign exchange intervention operations are essentially how we conduct monetary policy – which is solely directed at securing price stability. This is what we explained in our response to the US Treasury’s Report last month. Singapore’s monetary policy is centred on the exchange rate because it is the best way to secure price stability in a small, highly open economy. MAS manages the exchange rate as its monetary policy tool in the same way that other central banks conduct monetary policy by managing interest rates. Other central banks buy and sell government securities to affect liquidity and attain their interest rate targets. MAS buys and sells foreign currency against the Singapore Dollar to keep the $ within its policy band. Just as other central banks’ monetary policy operations cannot be construed as interest rate manipulation, MAS’ foreign exchange operations cannot be described as currency manipulation. 7 / 11  BIS central bankers' speeches  MAS has been in active dialogue with the US Treasury to ensure that our monetary policy framework and the role of foreign exchange intervention operations are well understood. The criteria the US Treasury uses is part of a generic framework that it has developed to assess the policies of its major trading partners.
Ravi Menon: Monetary Authority of Singapore's Annual Report 2018/19 Remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at MAS' Annual Report 2018/19 Media Conference, Singapore, 27 June 2019. * * * Good morning. Welcome to MAS’ Annual Report media conference. GLOBAL ECONOMY The outlook for the global economy has deteriorated in recent months. In April, the IMF revised downwards its forecast for global GDP growth to 3.3%, from 3.7% last October. Last year at this time, at our annual report conference, I said that if the trade conflict between the US and China escalates into a trade war, all three engines of global growth – manufacturing, trade, and investment – will stall. We are now in the throes of a trade (and technology) war, and all three engines have indeed stalled. Global manufacturing is in a synchronised downturn. Last month, the global Purchasing Managers’ Index (PMI) for manufacturing fell to 49.8, its lowest level in more than six years. In the US, new orders are near their weakest levels in three years. In the Eurozone, the downturn in manufacturing is even more severe. In China, the manufacturing PMI is in negative territory. In Asia, manufacturing output is contracting in about half of the economies, including Singapore. Global trade volumes have declined for two quarters in a row – in Q4 2018 and Q1 2019. This consecutive two quarters of contraction in world trade is rare. The last time this occurred was ten years ago.