Singapore Monetary Policy


Singapore: MAS keeps monetary policy unchanged

October 15, 2014

At its second semi-annual policy meeting of the year, which took place on 14 October, the Monetary Authority of Singapore (MAS) decided to maintain the modest and gradual appreciation path of the Singapore dollar nominal effective exchange rate (S$NEER). The Bank kept the slope, width and center of the S$NEER policy band unchanged, which was in line with market expectations.

In its accompanying statement, the Central Bank pointed out that it expects the global economy to maintain positive growth, although at an uneven pace across countries. The US economy is expected to continue its recovery, supported by a sustained improvement in the labor market and better results in corporate investment. However, growth in the Euro area is likely to remain subdued. In Asia, the ASEAN countries are expected to benefit from the US recovery, while the Chinese economy is projected to stay on its moderating growth path. On the domestic front, Singapore’s economic activity continues growing at a moderate pace. According to GDP advanced estimates released by the Ministry of Trade and Industry on 14 October, the economy expanded 2.4% in Q3 over the same period last year, which was unchanged from Q2’s print, but below the 2.7% the markets had expected.

Regarding price developments, the Bank pointed out that annual core inflation, which excludes private road transport and accommodation costs, averaged 2.2% in July–August, which was unchanged from the result tallied in Q2, but slightly up from the 2.0% recorded in Q1. MAS noted that, “wage inflation is likely to remain relatively firm, and businesses in food-related and some services sectors could further pass on cost increases. Consequently, MAS core inflation is projected to stay above its historical average over the next few quarters even if CPI-All Items inflation remains subdued.”

Considering that Singapore’s economy will continue growing at a moderate pace and that core inflation is likely to pick up in coming quarters, MAS decided to keep its monetary policy of gradual appreciation unchanged.

FocusEconomics Consensus Forecast panelists expect the exchange rate to reach 1.26 SGD per USD by end of this year. For 2015, the panel sees the exchange rate at 1.27 SGD per USD.

Author:, Economist

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