Singapore's monetary authority keeps policy settings unchanged as inflation lingers

All 19 economists in a Bloomberg survey had predicted the decision — the first under new Managing Director Chia Der Jiun. It’s also the first policy review since MAS decided to revisit monetary settings quarterly instead of twice-a-year previously.

Monday’s decision extends the MAS’s pause from last year after five rounds of tightening between October 2021 and 2022. Since the last review in October, Singapore’s economic growth has shown signs of resilience with the labor market remaining relatively tight and house-price growth strong. Price pressures, however, linger and risks are exacerbated by the conflict in the Middle East that threatens to push up energy costs.

The MAS’s language on dampening imported inflation and curbing domestic cost pressures indicate “a continued focus on price pressures that suggests the probability of easing this year is lower than many market participants think, in our view,” said Brian Tan, senior regional economist for ASEAN at Barclays Plc.

While inflation has edged lower for much of the second half of 2023, it has stayed elevated. The central bank’s preferred core inflation gauge – which includes food and fuel prices, and excludes accommodation and private transport — picked up pace in December to 3.3%, exceeding all analysts estimates.

The authority retained its 2024 core inflation projection of 2.5%–3.5%. Excluding the impact of the increase in the GST rate this year, core inflation is forecast at 1.5%–2.5%. It, however, sees the all-items inflation coming in lower at 2.5%–3.5%, down from the previous range of 3%–4%, amid declines in premiums for car ownership.

MAS also sees the prospects for Singapore’s economy to continue improving in 2024, while retaining its earlier projection for gross domestic product growth of between 1%–3%.

The MAS guides the local dollar against a basket of its major trading partners and adjusts the pace of its appreciation or depreciation by changing the slope, width and center of the currency band. It doesn’t disclose details of the basket, the band nor the pace of appreciation or depreciation.