SINGAPORE – Singapore is likely to leave monetary policy unchanged in October as the city-state grapples with a weak economic outlook and persistent price pressures.
All 15 analysts polled by Reuters expect the Monetary Authority of Singapore (MAS) to hold off making changes to its policy in the scheduled review.
“Keeping all three policy parameters unchanged would enable the MAS to balance between being vigilant on upside inflation risks and soft economic growth,” said analysts at DBS Bank.
October’s MAS decision comes as major central banks elsewhere debate how much more policy tightening might be needed to bring inflation under control amid some signs that price pressures have been moderating.
Instead of using interest rates, MAS manages monetary policy by letting the local dollar rise or fall against the currencies of its main trading partners within an undisclosed band, known as the Singapore dollar nominal effective exchange rate (S$Neer).
It adjusts its policy via three levers: the slope, mid-point and width of the policy band.
According to DBS’ model, current MAS policy means the S$Neer is appreciating 3 per cent a year. Maintaining the current slope would mean the MAS keeps monetary policy tight for longer, the analysts added.
Meanwhile, HSBC analysts do not expect the MAS to loosen monetary policy until April 2024.
“While inflation has been consistently cooling, it still takes a long time for core (inflation) to fall back to the MAS’ comfort zone,” analysts at HSBC said.
Mr Alex Holmes, a lead economist at Oxford Economics, expects the MAS to slightly reduce the slope of the policy band in an out-of-cycle move in January 2024.
The central bank is expected to release its next semi-annual monetary policy statement no later than Oct 13.
Singapore has seen inflation ease in recent months, although the number still remains above the pre-pandemic average, official data showed.
Headline and core inflation ranges are officially projected to average 4.5 per cent to 5.5 per cent, and 3.5 per cent to 4.5 per cent respectively in 2023.
Meanwhile, the trade-reliant nation’s industrial output and non-oil exports have contracted for an 11th consecutive month as global demand falters.
Singapore is often seen as a bellwether for global growth as its international trade dwarfs its domestic economy.
The MAS left monetary policy unchanged in April 2023, reflecting growth concerns, having tightened policy at five consecutive reviews prior to that.
It typically holds two policy reviews each year, although it had two additional out-of-cycle decisions in 2022 as consumer prices surged.
In August, Singapore downgraded its 2023 gross domestic product growth forecast to 0.5 per cent to 1.5 per cent, from 0.5 per cent to 2.5 per cent previously.
The economy grew 3.6 per cent in 2022. REUTERS
