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Homesingapore businessMAS keeps monetary policy unchanged, expects Singapore's economy to ‘improve gradually’ next...

MAS keeps monetary policy unchanged, expects Singapore's economy to ‘improve gradually’ next year

SINGAPORE: The Monetary Authority of Singapore (MAS) kept its exchange rate-based monetary policy unchanged on Friday (Oct 13), doing so for the second time this year and in line with market expectations.

In its half-yearly monetary policy statement, the Singapore central bank said it will “maintain the prevailing rate of appreciation” of its Singapore dollar nominal effective exchange rate (S$NEER) policy band.

There are no changes to the width of the policy band and the level at which it is centred.

All 15 analysts polled by Reuters had expected MAS to hold off making changes to its policy in this scheduled review.

MAS said Singapore’s economic growth is expected to improve gradually over 2024, although it warned that recovery could weaker than expected given an uncertain global economic outlook.

It also noted that core inflation – a key consumer price gauge for the central bank – has slowed and is projected to broadly decline over the course of next year.

“Against this backdrop, the current appreciating path of the S$NEER policy band is assessed to be sufficiently tight,” it said.

“A sustained appreciation of the policy band is necessary to dampen imported inflation and curb domestic cost pressures, thus ensuring medium-term price stability.”

MAS added that it will monitor global and domestic economic developments closely amid uncertainties in inflation and growth.

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Unlike most central banks that manage monetary policy through the interest rate, MAS manages monetary policy by letting the local dollar rise or fall against the currencies of its main trading partners within an undisclosed band, known as the Singapore dollar nominal effective exchange rate (S$NEER).

It adjusts its policy by changing the slope, mid-point and width of the policy band.

The MAS left monetary policy unchanged earlier in April, hitting the pause button on a series of tightening moves it began since October 2021 to combat rising inflation.

Then, it flagged the risk of a “deeper than anticipated” slowdown in the Singapore economy.


Separate data released on Friday showed the Singapore economy grew 0.7 per cent year-on-year in the third quarter, an uptick from the 0.5 per cent growth in the previous quarter.

On a quarter-on-quarter seasonally-adjusted basis, gross domestic product expanded by 1 per cent, picking up pace after growing marginally by 0.1 per cent during the April to June quarter.

MAS, in its statement, said third-quarter growth picked up on the back of an improvement in the manufacturing sector, although activity in some of the domestic-oriented sectors eased.

Citing “muted” growth prospects in the near term, it expects Singapore’s full-year growth to come in “at the lower half” of the official growth forecast range of 0.5 to 1.5 per cent

Moving into next year, growth “should improve gradually” in the second half of the year, MAS said.

This, according to HSBC economist Yun Liu, was a “rather cautious optimistic tone” about Singapore’s growth prospects in 2024.

“It is indeed more upbeat than back in April, when it repeatedly flagged downside risks to growth, noting that ‘prospects for Singapore’s GDP growth this year have dimmed’,” she said. “Fast forward to today, however, it removed this reference and expects the economy to expand at its potential rate in 2024.”

“We believe the relative optimism is largely driven by its expectation of a modest recovery in the global upturn,” she added in a note.


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Turning to inflation, the MAS said it expects core inflation, which excludes the costs of accommodation and private transport, to be on a “broad moderating trend”.

While oil prices have risen in recent months, global prices for most food commodities, as well as for intermediate and final goods, should be tempered by favourable supply conditions. In addition, labour costs are expected to rise at a slower pace next year, alongside the gradually cooling labour market. 

Hence, core inflation is projected to slow to an average of 2.5 to 3.5 per cent for 2024. Excluding the impact of the next scheduled increase in the Goods and Services Tax (GST) in January, core inflation is forecast at 1.5 to 2.5 per cent.

All-items or headline inflation is set to average between 3 and 4 per cent in 2024. Stripping out the impact of the next GST increase, headline inflation is forecast at a range of 2.5 to 3.5 per cent.

This comes as private transport inflation should moderate for the year given the expected increase in Certificate of Entitlement (COE) quotas. Accommodation inflation should also ease as the supply of completed housing units expands.


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MAS also announced that it is shifting to a quarterly monetary policy statement schedule from 2024. 

Statements will be released in January, April, July, and October.

Currently, it does so on a half-yearly basis, with statements typically expected in April and October.

The change is part of MAS’ “continuing efforts to enhance monetary policy communications”, adding that it “continues to uphold a medium-term orientation in its policy formulation to secure low and stable inflation”.

The next monetary policy is set for late January 2024.

Economists said the shift is likely spurred by a need to remain nimble to an increasingly uncertain world, as can be seen by the MAS’ recent cycle of five consecutive tightening moves which included two off-cycle decisions in January and July 2022.

“The post-pandemic macroeconomic environment is highly uncertain, as it has become more difficult to distinguish between cyclical economic developments and fading disruptions from the pandemic,” said Mr Shivaan Tandon, an economist covering emerging Asia at research firm Capital Economics.

Geopolitical tensions have also been taken up a notch recently with the Israel-Hamas conflict, which has potential implications for the energy market, said OCBC’s chief economist and head of treasury research and strategy Selena Ling.

The MAS may also see the need to review its policy frequently in response to more volatile currency swings and frequent changes in other central banks’ policy rates, Maybank economists Chua Hak Bin and Brian Lee said.

“While frequent policy reviews are not necessarily better per se, having more frequent policy reviews would facilitate greater market understanding of their economic assessment and policy trajectory guidance, in addition to having more policy flexibility,” said Ms Ling.

Mr Tandon noted that weak economic growth, a cooling labour market and fading disruption from the COVID-19 pandemic should help to put downward pressure on inflation moving forward.

With that, the MAS is likely to adopt a “wait-and-see” approach at its next meeting and keep monetary policy settings unchanged. 

“But with inflation set to move much closer to target and the economy likely to weaken, the MAS is likely to loosen policy at its April meeting,” said Mr Tandon.

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