MAS: No change in monetary policy as inflation slows

SINGAPORE:  On Jan 29, the Monetary Authority of Singapore (MAS) said they would “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.”

Monetary Policy

As long as there are no unexpected global shocks, MAS predicts a stronger Singapore economy in 2024. Growth is expected to become more widespread, but MAS Core Inflation might stay a bit high in the early part of the year before easing down by Q4.

The sustained appreciation of the policy band will keep imported inflation and domestic costs in check, ensuring medium-term price stability.

Economic Growth

Global economic activity stayed strong in the last quarter of 2023. Despite some bumps from elevated interest rates in advanced economies, the outlook is positive.

Singapore’s economy had a 1.7% growth in the last quarter of 2023. The whole year saw an estimated expansion of 1.2%.

MAS is seeing good things on the horizon: “Prospects for the Singapore economy should continue to improve in 2024, with GDP growth projected to come in between 1–3%.”

The recovery in the manufacturing and finance sectors, thanks to a turnaround in the electronics cycle and lower global interest rates, is expected to play a significant role.

Inflation Checkup

MAS Core Inflation for 2023 hit 4.2%, slightly up from 2022. Here’s the deal – excluding the GST impact, core inflation would have dropped by an estimated 0.6% in 2023 compared to the previous year.

CPI-All Items inflation averaged 4.8% in 2023, down from 6.1% in the year before.

Now, brace yourselves for some inflation this quarter as “inflation for certain services components, including public transport and healthcare, could also stay elevated as less frequently-adjusted prices rise to catch up with higher cost levels.”

But this is the good news – once we’re past the GST drama, core inflation is expected to “decline gradually over 2024.”

Lower imported costs, stable global energy and food prices, and slower local cost hikes should ease inflation. MAS Core Inflation is forecasted to slow to an average of 2.5–3.5% for 2024, unchanged from October 2023 projections.

So, to keep things in check, MAS keeps an eye on global and local developments, staying vigilant against risks to inflation and growth. /TISG

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