Singapore’s Central Bank Keeps Monetary Policy Unchanged, Increases Review Frequency
Singapore’s Central Bank Maintains Stability amid Moderate Inflation and Strong Economic Growth
Singapore’s central bank, the Monetary Authority of Singapore (MAS), has decided to keep its monetary settings unchanged in light of moderate inflation and better-than-expected economic growth. This decision comes as a surprise to economists who were anticipating potential adjustments.
Shift to Quarterly Schedule of Policy Statements in 2024
In an unexpected move, MAS announced its plan to transition from semi-annual to quarterly policy statements starting in 2024. This change aims to enhance communication and transparency in monetary policy. The increased frequency of reviews, set for January, April, July, and October, is seen as a positive development for markets and analysts.
Consistency in Currency Appreciation Policy Band
MAS has maintained its existing rate of appreciation for the Singapore dollar nominal effective exchange rate (S$NEER). The width and level at which the policy band is centered remain unchanged. MAS stated that although the near-term outlook for the Singapore economy is muted, gradual improvement is expected in the second half of 2024.
Economists’ Perspectives on the Frequency Change
Economists have offered their views on the increased frequency of policy reviews. Maybank economist Chua Hak Bin sees this as a response to volatile currency swings and frequent changes in policy rates by other central banks. OCBC economist Selena Ling believes it reflects the evolving global economic and geopolitical landscape.
Positive Economic Growth Surprises
Preliminary estimates by the trade ministry reveal that Singapore’s gross domestic product (GDP) increased by 0.7% year-on-year in the July-September period, surpassing economists’ expectations of 0.4% growth. This positive growth follows a narrowing of Singapore’s 2023 GDP growth forecast to 0.5% to 1.5%.
Unique Monetary Policy Approach and Inflation Trends
Singapore, as a trade-reliant economy, manages its monetary policy by adjusting the exchange rate of its dollar against a basket of currencies rather than using domestic interest rates. Inflation in Singapore has cooled from a 14-year high earlier this year to 3.4% in August.
In summary, MAS has chosen to maintain stability in its monetary policy given the current economic conditions. The shift to a quarterly schedule for policy statements in 2024 will provide more frequent updates, enhancing transparency and communication. Despite a muted near-term outlook, Singapore’s economy is expected to gradually improve in the second half of 2024.
