Singapore’s central bank announced on Friday that it would maintain its existing monetary policy settings, citing moderating inflation and better-than-expected economic growth in the city-state.
In a surprising move, the Monetary Authority of Singapore (MAS) declared that it would transition to quarterly policy statement releases in 2024, up from semi-annual statements.
The MAS is keeping the current rate of appreciation within its currency policy band, known as the Singapore dollar nominal effective exchange rate, or S$NEER. The width and center of the policy band remain unchanged. MAS stated, ‘Against the external outlook, prospects for the Singapore economy are muted in the near term but should improve gradually in H2 2024.’
As part of the increased policy statement frequency, monetary policy will be reviewed in January, April, July, and October, replacing the previous schedule of April and October alone.
Economist Chua Hak Bin from Maybank viewed the more frequent reviews positively, as they enhance communication and policy transparency, potentially responding to the volatile currency markets and frequent changes in other central banks’ policies.
Selena Ling, an economist at OCBC, considered the increased frequency a reflection of the evolving global economic and geopolitical landscape. She noted that the semi-annual frequency had been previously debated for its flexibility during crises.
Prior to April, MAS had tightened monetary policy five times in a row, including two off-cycle moves in the previous year. According to advance estimates from the trade ministry, GDP grew 0.7% on a yearly basis in the July to September period, exceeding expectations of 0.4% growth.
Inflation has declined from a 14-year high of 5.5% in January and February to 3.4% in August.
Singapore, being a heavily trade-dependent economy, manages monetary policy uniquely by adjusting its dollar’s exchange rate against a basket of currencies, as opposed to altering domestic interest rates like most other countries.
In August, Singapore revised its 2023 GDP growth forecast from 0.5% to 1.5%, down from the previous range of 0.5% to 2.5%. The city-state’s economy avoided a technical recession, expanding 0.1% quarter-on-quarter in April to June after a 0.4% contraction in the first quarter of 2023.