Singapore’s central bank leaves monetary policy unchanged for a third straight time

Monetary Authority of Singapore policy statement:

  • Will maintain the prevailing rate of appreciation of the S$NEER
    policy band
  • There will be no
    change to its width and the level at which policy band is centred


  • Barring any further
    global shocks, the Singapore economy is expected to strengthen in
  • MAS core inflation
    is likely to remain elevated in the earlier part of the year
  • Current monetary
    policy settings remain appropriate
  • Sustained
    appreciation of the policy band will continue to dampen imported
    inflation and curb domestic cost pressures
  • MAS core inflation
    should decline gradually and step down by q4, before falling further
    next year
  • MAS core inflation
    is projected to slow to an average of 2.5–3.5% for 2024 as a whole
  • 2024 GDP growth
    projected to come in between 1–3%
  • Slightly negative
    output gap in 2023 will narrow in the second half of 2024.
  • Excluding impact of
    increase in the GST rate this year, core inflation is forecast at
    1.5–2.5% for 2024
  • CPI-all items
    inflation in 2024 is now forecast to be lower at 2.5–3.5%
  • Will closely monitor global and domestic economic developments, and
    remain vigilant to risks to inflation and growth
  • Excluding the
    effects of the increase in the GST rate, headline inflation is
    forecast at 1.5–2.5% for 2024
  • Setting aside
    transitory impact of GST increase, core inflation is forecast to
    decline gradually over 2024
  • Both upside and
    downside risks to the inflation outlook remain
  • On domestic front,
    wage growth should ease this year as labour market tightness
  • Unexpected weakening
    in the global economy could induce a faster easing of cost and price
  • MAS as core inflation
    expected to rise in current quarter due in part to one-off impact of
    1%-point hike in GST from January this year

SGD update:

Note that the MAS’s key monetary policy tool is its exchange rate policy. It adjusts the exchange rate of its dollar (SGD) instead of changing domestic interest rates like most other economies.

It manages the SGD exchange rate against a basket of currencies of Singapore’s major trading partners.

  • sets the path of the policy band of the Singapore dollar nominal effective exchange rate (S$NEER)
  • this serves to strengthen or weaken the local currency against those of its main trading partners

S$NEER is a combined index made up of bilateral exchange rates between Singapore and its major trading partners

  • is a trade-weighted exchange rate

MAS permits the S$NEER to move up and down within the policy band (exact levels are not disclosed). If it goes out of this band, the MAS steps in by buying or selling Singapore dollars.

The policy band has three parameters that the MAS can adjust:

  • the slope, the level and the width
  • adjusting the slope will influence the pace at which the Singapore dollar strengthens or weakens
  • adjusting the level, or mid-point, of the policy band allows for an immediate strengthening or weakening of the S$NEER,
  • widening the policy band allows for more volatility of the S$NEER
  • these parameters are what are reviewed

The MAS made an unexpected announcement in October 2023 that it was switching to quarterly meetings to assess monetary settings from 2024. It had been meeting only twice a year, in April and October (but could, and did from time to time, meet more often, if conditions demanded an immediate change in settings, such as in 2022 when high inflation triggered two off-cycle moves).

This article was written by Eamonn Sheridan at Source