Singapore set to keep monetary policy unchanged as price risks linger

By Thomson Reuters Apr 9, 2024 | 1:54 AM

By Xinghui Kok

SINGAPORE (Reuters) – Singapore’s central bank is widely expected to keep its monetary policy unchanged this month and hold off from easing its settings until inflation starts to ease significantly.

All 11 analysts polled by Reuters expect the Monetary Authority of Singapore (MAS) to hold off making changes to its policy in the scheduled review on Friday.

“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,” said Denise Cheok, economist at Moody’s Analytics.

“Provided the inflation outlook stabilises, we see MAS loosening monetary settings in the second half of the year.”

Inflation in the Asian financial hub remains sticky. It cooled to 3.1% in January before speeding up to a 7-month high of 3.6% in February as seasonal effects from the Lunar New Year drove services and food prices higher.

The trade ministry and the central bank said in a joint statement last month that core inflation is expected to moderate over the rest of the year as import cost pressures decline and the labour market eases.

They projected both headline and core inflation to average 2.5% to 3.5% for 2024, unchanged from previous official forecast.

Central banks globally are starting to reverse their rapid interest rate hikes. The Swiss National Bank made a surprise 25 basis point cut last month and the European Central Bank is likely to follow in June.

Still, analysts expect reversals to be modest with periodic pauses as central banks try to balance growth and inflationary concerns.

“History shows that MAS did not rush into easing after inflation peaked at previous cycles in 2010s. Instead, the MAS maintained its appreciating policy stance on hold for a while,” OCBC analysts said in a research note.


Singapore is often seen as a bellwether for global growth as its international trade dwarfs its domestic economy.

Its economic growth slowed to 1.2% in 2023 from 3.6% in 2022. GDP rose 2.2% on a year-on-year basis in the fourth quarter, lower than an advance estimate of 2.8%.

The trade ministry projects growth of 1% to 3% in 2024.

In a survey published by the central bank last month, economists upgraded their 2024 growth forecast.

The MAS left monetary policy unchanged in April and October last year and January this year, reflecting growth concerns, having tightened policy at five consecutive reviews prior to that.

This year, MAS is making monetary policy announcements every quarter instead of semiannually.

Instead of using interest rates, the central bank manages monetary policy by letting the local dollar rise or fall against currencies of its main trading partners within an undisclosed band, known as the Singapore dollar nominal effective exchange rate, or S$NEER.

It adjusts policy via three levers: the slope, mid-point and width of the policy band.

Maybank economists said policy easing will happen in October at the earliest, “via a gentler S$NEER slope”.

“There is no rush to relax monetary policy at this juncture, given an export-driven economic recovery and still-elevated inflation,” they said.

(Reporting by Xinghui Kok; Editing by Sam Holmes)