Singapore is Keeping Its Monetary Policy Tight as Price Risks Remain

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(Bloomberg) — Singapore’s central bank left its monetary policy settings unchanged for a fourth straight session as price pressures remain high and the economy’s recovery is expected to continue.

The Monetary Authority of Singapore, whose main policy tool is the exchange rate rather than interest rates, maintained the slope, width and center of the currency band as expected by all 20 economists in a Bloomberg survey. This will keep the local dollar on an appreciating path and moderate imported inflation.

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Friday’s announcement, which came alongside first-quarter data that showed the city-state’s growth slowed more than expected, extends the MAS’s pause after five rounds of tightening between October 2021 and 2022. The decision follows similar moves by central banks in the Philippines and in Thailand, New Zealand and Canada this week.

Since the MAS’s last decision in January, underlying inflation has accelerated. In February, the core figure – which excludes accommodation and private road transport costs – accelerated to 3.6%, faster than the forecast increase of 3.4%. The figures for March are expected on April 23rd.

“Core MAS inflation is expected to remain elevated at the start of the year,” the central bank said in a statement on Friday, adding that it expects price increases to moderate in the fourth quarter before falling further in 2025. “Accordingly current.” The monetary policy framework remains appropriate.”

The MAS expects both core and headline inflation to range between 2.5% and 3.5% this year, while the full-year growth forecast remains at 1% to 3%.

The central bank said the outlook for Singapore’s economy is expected to improve over the year, supported by a recovery in the manufacturing and financial sectors and an expected easing in global interest rates.

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“The only addition to today’s statement compared to January was the mention that ‘the prevailing rate of appreciation of the monetary policy band is required’ to maintain a moderating effect on imported inflation,” said Khoon Goh, head of research at Australia & New Zealand Banking Group . “This suggests that there is no intention to ease the policy any time soon.

The MAS controls the local dollar against a basket of its major trading partners and adjusts the pace of its appreciation or depreciation by changing the slope, width and center of the currency band. No details about the basket, band, or pace of appreciation or devaluation are disclosed.

“It is too premature to expect any easing,” said Selena Ling, chief economist at Oversea-Chinese Banking Corp Ltd., especially if MAS sticks to its view that core CPI will decline in the fourth quarter and fall further in 2025 . “Major Central.” Banks are also somewhat hesitant to do this as recent inflation numbers have been stronger, largely due to the rise in crude oil prices.”

Ling sees a “window of relaxation” in the second half of this year, but “if core CPI falls sooner and/or more significantly than expected, July or October could be fair game.”

– With support from Tomoko Sato, Kevin Varley, Aradhana Aravindan, Natalie Choy and Nurin Sofia.

(Updates with details on GDP data and comments from economists.)

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