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Singapore Monetary Policy April 2024

Singapore: MAS leaves monetary policy unchanged in April

At its quarterly monetary policy meeting held on 12 April, the Monetary Authority of Singapore (MAS) maintained the prevailing rate of appreciation of the Singapore dollar’s nominal effective exchange rate (S$NEER) for a fourth straight time, as markets had anticipated. The Bank also kept the width of the policy band and the level at which it is centered unchanged.

The MAS stood pat in April due to stubborn price pressures. MAS core inflation, which excludes the cost of accommodation and private transport, rose above Q4 2023’s average in January–February—albeit by less than authorities had expected—and is forecast by the MAS to remain elevated until Q4 2024. As such, the MAS deemed it necessary to maintain current monetary conditions “to keep a restraining effect on imported inflation as well as domestic cost pressures”.

In its communique, the Authority did not provide explicit forward guidance. Similar to January’s meeting, the MAS sees risks to inflation as broadly balanced: Shocks to global costs for food and energy and unexpectedly strong demand for labor pose upside risks, while a weaker-than-expected global economy poses a downside risk. As such, the MAS stated it would continue monitoring global and domestic economic factors, remaining vigilant to risks to inflation and GDP growth. Most analysts expect policy easing to start in H2 2024.

The next monetary policy meeting will be held no later than 31 July.

ING analyst Nicholas Mapa commented on the outlook:

“With inflation projected to stay above 2% YoY until 4Q, we expect the MAS to hold again at their next meeting with the earliest chance for some policy adjustments carried out only at their October policy meeting.”

Nomura analysts said:

“Barring an external shock, we believe MAS will leave its policy settings unchanged in 2024, with two-way risks to FX policy. Specifically, we see a low risk of further FX tightening, owing to recent geopolitical developments (e.g., Israel-Iran) that could lead to significantly higher energy prices and increase the risks to what is already sticky local core inflation. The risk of FX easing may materialize if the global economy slows by more than expected; this would likely exacerbate the downside risks to local core inflation […]. If there are no externally led shocks through 2024 and MAS’s inflation outlook materialises as expected, FX policy easing will likely be a growing theme towards the end of 2024 and likely into early 2025.”

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