Singapore Monetary Policy


MAS eases monetary policy slightly in October

At its second scheduled semi-annual meeting of 2015, which took place on 14 October, the Monetary Authority of Singapore (MAS) decided to “slightly” reduce the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER). Since its unplanned meeting on 28 January, the MAS has kept a monetary policy stance of “modest and gradual appreciation”. Although the slope has been softened, the width and level at which the policy band is centered were left unchanged. While the intensity and the exact nature of the MAS’ move was debated by analysts, an easing of the monetary policy stance had been expected. On this topic, Hak Bin Chua, ASEAN Economist at Merrill Lynch commented:

“We think the slope of the ‘modest and gradual appreciation’ was reduced to +0.5%, from +1% previously. Markets were expecting more aggressive easing (to neutral or zero slope), including ourselves, in view of weakening external demand. In our view, the MAS will continue to react rather than pre-empt changing economic conditions, leaving room for further easing at the next (April 2016) meeting, if growth continues to deteriorate.”

The Central Bank pointed out in its latest statement that the domestic economy is expected to grow at a moderate pace in 2015 and 2016. Weaker growth in the region is expected to weigh on Singapore’s economy, despite renewed dynamism in the U.S. and an expected recovery in Japan and the Eurozone. The MAS reduced its 2015 GDP growth forecast from 2–4% to 2.0–2.5% following the contraction recorded in Q2 and the anemic growth tallied in Q3. The MAS highlighted that the manufacturing sector has kept declining and that the financial sector has suffered from the weaknesses in this area. The Central Bank added that, “the subdued global growth will exert a drag on the external-oriented sectors in Singapore in the quarters ahead. In comparison, the domestic-oriented sectors should expand at a moderate pace, underpinned by sustained demand for healthcare and education services, as well as public infrastructure spending.”

Regarding price developments, the Bank noted that, “external sources of inflation are likely to stay generally benign, given ample supply buffers in the major commodity markets and weak global demand conditions.” The MAS forecasts core inflation to go back gradually to its 2.0% long term average through 2016. The Central Bank concluded that it would, “continue with the policy of a modest and gradual appreciation of the S$NEER policy band.  However, the rate of appreciation will be reduced slightly.” The next meeting is scheduled for mid-April 2016.

FocusEconomics Consensus Forecast panelists expect the exchange rate to reach 1.43 SGD per USD by end of this year. For 2016, the panel sees the exchange rate at 1.45 SGD per USD.

Author:, Economist

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Singapore Monetary Policy Chart

Singapore Exchange Rate October 2015 0

Source: Monetary Authority of Singapore

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