SINGAPORE: Singapore’s central bank, the Monetary Authority of Singapore (MAS), is expected to keep its current monetary policy unchanged in April. According to economists, some predict a possible adjustment will occur in July.
The review is happening this week as the economy is mostly bouncing back thanks to exports, but worries about inflation are still there.
The Business Times reports that economists from Maybank, Chua Hak Bin, and Brian Lee think MAS will see the current monetary settings as suitable for guiding core inflation down to 2% by early next year.
“There is no rush to relax monetary policy at this juncture, given an export-driven economic recovery and still-elevated inflation,” they said.
MAS hasn’t made any policy changes for a year after five consecutive tightening moves that started in October 2021.
OCBC FX strategist Christopher Wong suggested that the rise in February’s inflation, mainly because of Chinese New Year effects, fits with what policymakers expected, reducing speculation about possible easing measures.
He said, “This should dampen market chatter that a potential MAS easing is round the corner.”
Citi economist Kit Wei Zheng mentioned factors like a negative output gap, a cooling labour market, and gradually moderating core inflation as reasons for MAS to maintain its current policies.
Analysts have looked at historical data to guess what MAS might do next, with indications showing the central bank usually takes its time before making any changes.
OCBC’s Wong noted MAS’s past approach of being cautious before implementing easing measures, preferring to wait before adjusting policy, citing when inflation peaked in previous cycles, like in the 2010s.
UOB economists Alvin Liew and Jester Koh looked at the “inflation gap” and suggested that while there might be a 30% probability signalling a chance for easing, it’s more likely that any policy adjustments would happen in July.
They noted, “At the current juncture, the inflation gap remains just a tad positive and could fall further in the coming months, which suggests the door to normalisation may open at the upcoming (review).”
DBS Group Research predicts a possible adjustment in July, possibly by slightly reducing the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band.
This prediction is based on the expectation of core inflation cooling later in the year for various reasons, including the recent goods and services tax (GST) hike.
OCBC’s Wong acknowledged the chance of MAS easing in the second half of the year, depending on external inflation pressures and the significant easing of Singapore’s core inflation.
However, Citi economist Kit Wei Zheng mentioned a low possibility of steepening the policy slope in the latter half of the year unless clear signs suggest closure of the output gap, potentially causing core inflation to exceed expectations of the 2% forecast by 2025. /TISG
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