Move is city state's first emergency policy change since Sept 11, 2001 attacks on US

Singapore's central bank unexpectedly eased monetary policy on Wednesday, sending the currency to the weakest since 2010 as the country joined global policymakers in shoring up growth amid dwindling inflation.

The Monetary Authority of Singapore, which uses the currency as its main policy tool, said it will seek a slower pace of appreciation in the island's dollar in an unscheduled statement on Wednesday. It also cut the inflation forecast for 2015, predicting prices may fall as much as 0.5 percent.

The move was the first emergency policy change since one following the Sept 11, 2001 attacks for the MAS - which only has two scheduled policy announcements a year - reflecting how the plunge in oil has changed the outlook in recent months.

Singapore becomes at least the ninth nation to ease policy this month, as officials from Europe to Canada and India contend with escalating disinflation and faltering global growth.

"They're essentially trying to stay ahead" by moving before the scheduled April policy review, said Song Seng Wun, an economist at CIMB Research in Singapore. "For Singapore to do such an unscheduled move, it has to be against the backdrop of enormous uncertainty."

ECB action

The European Central Bank announced quantitative easing plans this month while Canada, Denmark and India cut interest rates. More may come - the Bank of Japan chief said the country may need to get creative in any further monetary stimulus and Thai policy makers face growing pressure to lower borrowing costs.

Countries seeking cheaper currencies are running up against a limited number of major economies where policymakers are at ease with appreciation.

The exceptions include the US and Switzerland, which abandoned its exchange-rate cap this month. In Australia, where an acceleration in core inflation sent the local currency higher on Wednesday, the central bank has signaled it would prefer a weaker exchange rate.

The Singaporean dollar fell 1 percent to S$1.3524 per US dollar as of 1:06 pm local time, the weakest since September 2010. The currency has fallen almost 6 percent against the US dollar in the past three months, the third-biggest loser among 11 most-traded Asian currencies tracked by Bloomberg.

Significant shift

The MAS will probably weaken the Singapore dollar "quite solidly" and the currency may drop to about S$1.4 against the US dollar by the end of March, said Tsutomu Soma, department manager of the fixed-income business unit at Rakuten Securities.

"Since the last Monetary Policy Statement in October, developments in the global and domestic inflation environment have led to a significant shift in Singapore's CPI inflation outlook for 2015," the MAS said. "The global economy continues to grow at an uneven pace" and falling oil prices have curbed inflation, it said.

Singapore's consumer prices fell for a second month in December for the first time since 2009, according to data compiled by Bloomberg. The central bank cut its 2015 inflation forecast to a range of negative 0.5 percent to 0.5 percent, from the October prediction of 0.5-to-1.5 percent.