SINGAPORE — Singapore's central bank tightened its monetary policy settings unexpectedly on Monday (July 27), with inflation projected to step up in the months ahead.Singapore's central bank has a unique method of managing monetary policy, tweaking the exchange rate of its currency instead of changing domestic interest rates like many economies.The Monetary Authority of Singapore (MAS) sets the path of what it calls the policy band of the Singapore dollar nominal effective exchange rate (S$NEER), thus strengthening or weakening the local currency against those of its main trading partners.Why does Singapore use this method?Singapore is a small and trade-reliant economy. Gross exports and imports of goods and services are more than three times its gross domestic product (GDP). Almost 40 cents of every Singapore dollar spent domestically is on imports.That means the exchange rate has a much bigger influence on inflation than domestic interest rates. Read more