SINGAPORE: The Monetary Authority of Singapore is keeping its monetary policy unchanged just as it did in April.
Explaining why it will maintain the current rate of appreciation of the Singapore dollar nominal effective exchange rate (S$Neer), MAS said in a press release on Friday (October 13):
“Singapore’s GDP growth is expected to improve gradually over 2024. However, the global economic outlook remains uncertain and the domestic recovery could be weaker than expected. MAS Core Inflation has slowed and is projected to broadly decline over the course of 2024.
“Against this backdrop, the current appreciating path of the S$NEER policy band is assessed to be sufficiently tight. A sustained appreciation of the policy band is necessary to dampen imported inflation and curb domestic cost pressures, thus ensuring medium-term price stability.”
Unlike most central banks that manage monetary policy through the interest rate, 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), said Channel News Asia.
MAS said in its press release on Friday (Oct 13) that core inflation eased to 3.4 per cent year on year in August 2023, considerably lower than its peak of 5.5 per cent in January. Inflation has slowed across a broad range of goods and services, including for non-cooked food, food services, travel-related and point-to-point transport services, it added, noting that core inflation is projected to ease to between 2.5 per cent and 3 per cent year on year in December. For 2023 as a whole, MAS core inflation is projected to come in at around 4 per cent, unchanged from last year. Excluding the impact of the GST increase in January this year, however, core inflation will be lower compared to 2022, said MAS.
It added: “CPI-All Items inflation declined to 4 per cent year on year in August. It is forecast to pick up slightly in the remaining months of 2023 amid higher COE premiums and petrol pump prices. But for the year as a whole, CPI-All Items inflation should average around 5 per cent, down from 6.1 per cent the year before.”
CPI-All Items inflation, also known as headline inflation, refers to changes in the price level of the entire Consumer Price Index (CPI) basket. Meanwhile, MAS Core Inflation measures price changes of a subset of goods and service in the CPI basket, excluding accommodation and private road transport.
MAS Core Inflation is seen as a closer gauge of the day-to-day price changes that affect most households, says MAS.
MAS will be shifting to a quarterly monetary policy statement schedule from 2024. Statements will be released in January, April, July, and October. This is part of MAS’ continuing efforts to enhance monetary policy communications.