Singapore stands pat on monetary policy, ups inflation view

SINGAPORE, Oct 12 (Reuters) - Singapore's central bankunexpectedly kept monetary policy on hold on Friday, saying itwill continue letting the Singapore dollar appreciate at itscurrent pace as inflation remained a worry.

"Core inflation receded recently but will face upwardpressure from higher food and services costs. CPI-All Itemsinflation will remain elevated for some time," the MonetaryAuthority of Singapore (MAS) said in its half-yearly monetarypolicy statement.

"MAS will therefore maintain the policy of a modest andgradual appreciation of the S$NEER (nominal effective exchangerate) policy band. There will be no change to the slope andwidth of the policy band, as well as the level at which it iscentred," the central bank said.

"This policy stance is assessed to be appropriate incontaining inflationary pressures and keeping the economy on apath of restructuring towards sustainable growth," MAS added.

MAS said core inflation is expected to average around 2.5percent in 2012 and 2-3 percent next year, while headlineinflation is likely to come in "slightly above 4.5 percent" in2012, mainly because of higher car prices.

Seventeen of 21 forecasters polled by Reuters before thepolicy statement had expected MAS to loosen policy by slowingthe Singapore dollar's pace of appreciation, while fourpredicted the central bank would stand pat as inflation remainedhigh by historical standards.

Singapore manages monetary policy by letting its dollar riseor fall against the currencies of its main trading partnerswithin an undisclosed trading band.

At its April policy announcement, MAS reiterated its biasfor a "modest and gradual appreciation" of the Singapore dollarand increased the slope of the policy band slightly, indicatingit will let the currency appreciate at a faster pace to helplower inflation expectations.

The central bank also narrowed the policy band in April,indicating it will allow less fluctuations in the localcurrency.

The Singapore dollar , the world's 12th most-tradedcurrency, has gained around 5.6 percent so far this year, helpedby rising foreign investment in Singapore assets that are seenas a safe haven amid the turmoil in global financial markets.

(Reporting by Kevin Lim; Editing by Sanjeev Miglani)

((Kevin.Lim@thomsonreuters.com)(65)(6403 5663))