Singapore Maintains Monetary Policy For Fifth Time; Cuts Inflation Outlook

Singapore’s central bank left its monetary policy unchanged for the fifth consecutive meeting on Friday despite downgrading the inflation outlook.

The Monetary Authority of Singapore decided to 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 it is centered.

The MAS applies the exchange rate against a basket of currencies within an undisclosed band as its monetary policy tool. The central bank last tightened its policy in October 2022.

The MAS today lowered its headline inflation outlook to 2.0 to 3.0 percent this year, from the previous forecast of 2.5 to 3.5 percent. The core inflation forecast was kept unchanged at 2.5 to 3.5 percent.

The bank said core inflation is expected to “step down more discernibly” in the fourth quarter this year and into 2025.

Softening import price inflation and easing domestic price pressures amid a moderation in labor cost growth helped to reduce inflation in the second quarter, the bank observed.

Growth momentum is projected to improve in the second half of 2024. The bank expects growth to come in closer to its potential rate of 2-3 percent for the full year.

Capital Economics economist Shivaan Tandon said policymakers are likely to lower the slope of the nominal effective exchange rate band to signal their preference for a slower pace of currency appreciation in the coming quarters.