MAS has decided to keep its monetary policy unchanged, indicating expectations for a decrease in inflation. According to MAS, core inflation is on a decline and is expected to drop further to around 2 per cent by the end of 2024. The central bank also highlighted Singapore’s growth momentum, stating that the economy should continue to expand at a steady pace given no significant weakening in global final demand. As quoted from the Monetary Authority of Singapore (MAS), “Based on this outlook, MAS assesses that the monetary policy settings are for now still consistent with medium-term price stability.”
This decision marks the sixth consecutive time that MAS has maintained its policy. As part of the unchanged policy, MAS has stated that it will maintain the existing rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band without any adjustments to the band’s width or center. Currently, MAS’s monetary policy is exchange-rate based, setting it apart from other countries that use interest rates.
MAS’s forecast also includes a projection of a decrease in headline inflation to approximately 2.5 per cent this year, a considerable drop from the 4.8 per cent recorded last year. Furthermore, the central bank expects headline inflation to ease further to 1.5 to 2.5 per cent in 2025. The lower inflation forecast is a result of various factors, including a slowdown in accommodation inflation due to reduced leasing demand, offsetting an anticipated rise in private transport inflation. Additionally, labor costs in Singapore are expected to rise gradually, aligned with a recovery in productivity.
The decision to maintain the unchanged monetary policy reflects MAS’s optimistic outlook on Singapore’s economic position. Following the robust growth of 4.1 percent in the third quarter of the year, supported by a boost in manufacturing output and activity in the modern services cluster, MAS has anticipated sustained growth for the rest of the year. However, the central bank also acknowledges “significant uncertainty” surrounding the economic outlook, particularly related to geopolitical and trade conflicts, and the impact of global macroeconomic policy easing on the durability of the electronics upturn.
