Monetary Authority of Singapore policy statement, leaves policy on hold, as expected:
- will maintain the prevailing rate of appreciation of the S$NEER policy band
- There will be no change to its width and the level at which it is centred
More:
- core inflation should average between 2.5%-3.0% for 2024 as a whole
- core inflation
should end the year around 2% - core inflation
momentum is expected to remain contained in Q4 - Singapore economy
should continue to expand at a steady pace and keep close to its
potential path in 2025 - next year, the
Singapore economy is currently forecast to expand at close to its
potential rate - core inflation is
expected to average around the mid-point of the forecast range of
1.5-2.5% in 2025 - for the year as a
whole, MAS expects GDP growth to come in around the upper end of the
2-3% forecast range - based on this
outlook, MAS assesses that the monetary policy settings are for now
still consistent with medium-term price stability. - CPI-all items
inflation is forecast to average 1.5-2.5% as well in 2025 - core inflation has
stepped down but is anticipated to decline further to around 2% by
the end of 2024 - the risks to
Singapore’s inflation outlook are more balanced compared to three
months ago
—
Note that the MAS’s key monetary policy tool is its exchange rate policy. It adjusts the exchange rate of its dollar (SGD) instead of changing domestic interest rates like most other economies.
It manages the SGD exchange rate against a basket of currencies of Singapore’s major trading partners.
- sets the path of the policy band of the Singapore dollar nominal effective exchange rate (S$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