Singapore’s central bank keeps policy unchanged, as expected
2024.07.25 20:55
By Xinghui Kok and Yantoultra Ngui
SINGAPORE (Reuters) -Singapore’s central bank on Friday left its monetary policy settings unchanged for the fifth consecutive time, as expected, as growth picks up and ahead of an expected year-end moderation in inflation.The Monetary Authority of Singapore (MAS) said it expects the economy to strengthen over the rest of 2024, with growth coming in closer to its potential rate of 2–3%.
“Barring renewed shocks to costs, core inflation should step down more discernibly in Q4, and fall further to around 2% in 2025,” MAS said.
The bank said it will maintain the prevailing rate of appreciation of its exchange rate-based policy band known as the Nominal Effective Exchange Rate, or S$NEER.
The width and the level at which the band is centred did not change.
MAS said current policy settings remain appropriate and “will keep a restraining effect on imported inflation as well as domestic cost pressures, and ensure medium-term price stability”.
The bank adjusted its headline inflation forecast downwards to average 2.0–3.0% this year from 2.5–3.5%, but kept its core inflation forecast at 2.5–3.5%.
“MAS kept its two-sided inflation risk outlook at this juncture while waiting for the 2025 outlook to fall to more benign levels around 2%,” OCBC economist Selena Ling said. “In my view, this affords maximum flexibility for the upcoming policy meetings while awaiting confirmation or conviction that core CPI will indeed step down more discernibly in the fourth quarter.”
Maybank economist Chua Hak Bin said he didn’t think the lower headline inflation forecast meant MAS was getting ready for an easing in the next policy schedule in October.
“With growth returning to potential and core inflation somewhat sticky, MAS will likely maintain the current pace of appreciation for the rest of the year,” said Chua.
Of the 10 analysts polled by Reuters ahead of the review, nine had expected the MAS to hold policy settings steady.
Gross domestic product (GDP) rose 2.9% on a yearly basis in the second quarter of 2024.Annual core inflation fell to 2.9% in June, the lowest since March 2022.
Full-year growth in 2023 was 1.1%, down from 3.8% in 2022.As an open, trade-reliant economy, Singapore uses a unique method of managing monetary policy, tweaking the exchange rate of its dollar against a basket of currencies instead of domestic interest rates like most other countries.
