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Singapore Monetary Policy April 2019

Singapore: MAS leaves monetary policy unchanged at its first semi-annual meeting

At its first biannual meeting of 2019 held on 12 April, the Monetary Authority of Singapore (MAS) maintained the undisclosed rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band. The Authority also kept the width of the policy band and the level at which it is centered unchanged. The MAS’ commitment to hold follows a slight increase in the slope of the S$NEER policy band at the previous meeting held in October 2018.

The decision was underpinned by mild inflationary pressures and a softening in economic growth observed in the previous several quarters. CPI inflation was subdued in the first two months of 2019, partly due to lower oil import costs and cheap electricity due to the liberalization of the retail electricity market, while MAS core inflation—which excludes accommodation and private road transport costs—has eased slightly since the previous meeting. As a result, the MAS revised down its core inflation forecast range for 2019 to 1.0-2.0% from 1.5-2.5% previously.

Moreover, the external outlook has grown less favorable due to trade tensions and slowdowns in developed economies, and many key central banks have adopted more accommodative monetary stances. The MAS expects growth to come in slightly below the midpoint of the 1.5-3.5% forecast range for this year amid weakness in the trade sector.

Considering these developments, the Authority left its policy stance unchanged to encourage a modest and gradual appreciation of the S$NEER policy band and support medium-term price stability. The overall tone of the April communiqué was slightly more dovish given the number of uncertainties in the short-term outlook. Given the MAS now expects below-potential GDP growth this year and revised down its inflation projections, this hints at another hold at the next biannual meeting in October.

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