The Monetary Authority of Singapore (MAS) will keep the prevailing rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band.
There will be no change to its width and the level at which it is centred, says the central bank in its July monetary policy statement (MPS).
“The Singapore economy is expected to strengthen over the rest of 2024, with the slightly negative output gap closing by year-end. Barring renewed shocks to costs, core inflation should step down more discernibly in 4Q, and fall further to around 2% in 2025,” says MAS in its July 26 statement.
As such, its current monetary policy settings remain “appropriate”.
“The prevailing rate of appreciation of the policy band will keep a restraining effect on imported inflation as well as domestic cost pressures, and ensure medium-term price stability,” explains the central bank.
Economic activity in Singapore’s major trading partners remained “broadly stable” in recent months with resilient business investment in the US supporting the pick-up in global electronics manufacturing and trade.
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China’s growth was also underpinned by strong exports despite a slowdown in private consumption, it adds.
“In the quarters ahead, global final demand should gain from the anticipated lowering of interest rates and continuing investments in information technology,” notes the central bank.
However, the outlook is subject to uncertainties including around the pace and timing of monetary policy easing as well as the impact of geopolitical and trade conflicts on confidence and production costs.
The S$NEER has continued to strengthen in the upper half of the appreciating policy band since the MAS kept the rate of appreciation in April’s MPS.
Inflation outlook
Singapore's CPI-all items inflation - or headline inflation - is now expected to average between 2.0% to 3.0% in 2024, down from the previous forecast of 2.5% to 3.5%. MAS announced, on July 23, that the previous range was under review.
The new forecast reflects the lower-than-anticipated private transport inflation in recent months.
For 2024, MAS core inflation is still projected to average between 2.5% to 3.5%.
