By Ronnie Harui
SINGAPORE–The Monetary Authority of Singapore left its monetary policy unchanged for a third straight review and said it expects Singapore’s economic prospects to continue improving this year.
The central bank on Monday said it would maintain the prevailing rate of appreciation of the Singapore dollar nominal effective exchange rate policy band, as the current monetary policy settings remain appropriate.
The sustained appreciation of the policy band will continue to damp imported inflation and curb domestic cost pressures, thereby ensuring medium-term price stability, the MAS said.
All 15 economists and analysts surveyed by The Wall Street Journal had expected the MAS to keep its policy unchanged.
There will be no change to the width and the level at which the policy band is centered, the central bank said. The MAS kept its policy on hold at its meetings in April and October of last year. It has shifted to quarterly meetings from this year. The MAS’s monetary policy is centered on Singapore’s exchange rate, which it considers an effective tool for maintaining price stability in the small and open economy.
Prospects for Singapore’s economy should continue to improve in 2024, with the country’s gross domestic product projected to come in between 1% and 3%, the MAS said.
Recovery in the manufacturing and financial sectors should be supported by the turnaround in the electronics cycle and expected declines in global interest rates, respectively, even as growth in the domestic-oriented sectors further normalizes toward prepandemic rates, the MAS said. It expects the slightly negative output gap in 2023 to narrow in the second half of 2024.
Core inflation could rise in the current quarter, owing partly to one-off effects of the 1-percentage-point increase in the goods and services tax from January this year, and the increase in the carbon tax, the central bank said.
Excluding the transitory impact of the GST increase, core inflation is projected to slow to an average of 2.5%-3.5% for 2024, unchanged from the October forecast, it said.
Amid declines in certificate of entitlement premiums since November and the bigger COE supply this year compared with 2023, CPI-All items inflation in 2024 is now forecast to be lower at 2.5%-3.5% versus the previous projected range of 3%-4%, the MAS said.
Write to Ronnie Harui at [email protected]
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