Singapore’s MAS Anticipated to Maintain Monetary Policy Amid Inflation Concerns
The Monetary Authority of Singapore (MAS) is anticipated to maintain its current monetary policy in the upcoming review this month, with expectations of postponing any easing measures until there is a significant decrease in inflation.
According to a Reuters survey of 11 analysts, there is a consensus that the MAS will not adjust its policy in the imminent review slated for Friday. Denise Cheok, an economist at Moody’s Analytics, commented, “We expect MAS to hold its monetary settings steady at the April meeting.
Although headline and core inflation have been on a bumpy downtrend, core inflation remains stubbornly above the central bank’s 2% target.” She added, “Provided the inflation outlook stabilizes, we see MAS loosening monetary settings in the second half of the year.”
Inflation in Singapore has been persistent, with a rate of 3.1% in January and an increase to 3.6% in February, marking a 7-month peak driven by seasonal Lunar New Year effects impacting services and food prices.
A joint statement from the trade ministry and the central bank last month forecasted a moderation in core inflation throughout the year due to diminishing import costs and a relaxing labor market, projecting an average inflation rate of 2.5% to 3.5% for 2024, aligning with prior estimates.
Globally, central banks are beginning to dial back on aggressive interest rate hikes, with the Swiss National Bank unexpectedly cutting rates last month and the European Central Bank expected to follow suit in June.
However, analysts foresee cautious and measured reversals from central banks, aimed at balancing growth with inflation concerns.
OCBC analysts, referencing past trends, noted, “History shows that MAS did not rush into easing after inflation peaked at previous cycles in the 2010s. Instead, the MAS maintained its appreciating policy stance on hold for a while.”
Singapore’s economy, a critical indicator for global growth due to its extensive international trade, recorded a slowdown to 1.2% growth in 2023 from 3.6% in 2022, with the trade ministry predicting a growth rate of 1% to 3% in 2024.
A recent central bank survey showed economists have revised their growth forecasts for 2024 upwards.
The MAS, which has left monetary policy unchanged in its last three reviews, operates uniquely by managing the Singapore dollar’s value against a basket of its major trading partners’ currencies through the Singapore dollar nominal effective exchange rate (S$NEER), adjusting through the slope, mid-point, and width of its policy band.
Maybank economists suggest that any policy easing would likely not occur before October, possibly through a gentler S$NEER slope, given the continued export-driven economic recovery and sustained high inflation levels.
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