MAS maintains Singdollar policy, lowers headline inflation forecast

It expects pick-up in economy, keeps projection for core inflation unchanged

- Ovais Subhani

Singapore’s central bank kept unchanged its monetary policy stance which favours an appreciating trade-weighted Singapore dollar, but lowered its estimate of the all-items consumer price index (CPI) in a sign that inflationary pressures are easing.

The Monetary Authority of Singapore (MAS) said on July 26 that it will maintain the prevailing rate of appreciation of the Singapore dollar nominal effective exchange rate (S$Neer) policy band, with no change to the width of the band or the level at which it is centred on.

These are parameters that indicate how high and how fast the central bank wants the currency to appreciate.

It also expects a pick-up in the growth momentum, saying the Singapore economy should improve in the second half of 2024.

Gross domestic product growth is likely to come in closer to its potential rate of 2 per cent to 3 per cent for the full year, the MAS added. That is compared with the Ministry of Trade and Industry’s official forecast of 1 per cent to 3 per cent.

MAS trimmed its projection for 2024 all-items CPI, or the headline inflation, to 2 per cent to 3 per cent, from an earlier forecast of 2.5 per cent to 3.5 per cent. It said the cut mainly reflected lower-than-anticipated private transport inflation in recent months.

The central bank announced on July 23 that it was reviewing its forecast for the measure after data in the CPI report for June showed headline inflation fell to an annual rate of 2.4 per cent from 3.1 per cent in May. That was the lowest rate since August 2021 and was below the 2.7 per cent forecast in a Bloomberg poll of analysts.

MAS kept its forecast for core inflation – which excludes private accommodation and transport costs and better reflects household expenses – unchanged at 2.5 per cent to 3.5 per cent.