Singapore's central bank left policy unchanged at its 2024 Q1 meeting

“MAS will closely monitor global and domestic economic developments, and remain alert to risks to inflation and growth,” the central bank said in a statement. Insurance Statement.

Unlike other central banks that adjust their domestic lending rates, MAS adjusts its currency's exchange rates. The central bank strengthens or weakens its currency against its major trading partners, thus effectively setting the S$NEER. The exact exchange rate is not set, rather S$NEER can move within the set policy band, the precise levels of which are not disclosed.

Earlier this year, MAS switched from reviewing its monetary policy twice a year to quarterly reports. It said it will publish reports in January, April, July and October.

The central bank said it expects the country's GDP to improve in 2024, estimating growth between 1% and 3%. Singapore's economy grew by 1.2% last year as of early January, but showed growth of 2.8% year-on-year in the fourth quarter, the fastest pace of the year.

“Barring additional global shocks, Singapore's economy is expected to strengthen in 2024 and growth will become more broad-based. MAS core inflation may pick up earlier in the year, but should gradually ease and level off by Q4, before falling further next year,” MAS said.

Core inflation is expected to pick up in the current quarter “due in part to the 1% point hike in GST from January this year,” MAS said. Singapore raised its Goods and Services Tax by one percent on January 1.

The central bank estimated that core inflation would average between 2.5% and 3.5% in 2024, unchanged from its October forecast. Excluding the impact of the GST hike, core inflation is forecast to average 1.5% to 2.5%.

Ahead of the MAS decision, Goldman Sachs noted that a significant increase in global commodity prices or higher business costs could pose a risk to inflation, as could a rise in GST.

Economists will be watching for clues about when Singapore's central bank will start easing monetary policy.

Singapore's central bank ended its policy tightening cycle in April.

Core inflation remains sticky, though it shows signs of easing throughout 2023.

At its December meeting, the US Federal Reserve forecast at least three interest rate cuts through 2024. Central banks around the world largely follow the central bank's guidance and economists will monitor MAS results for insight into when it might start easing its own policy. .

“Our base case is that MAS should be relaxed in April.

Liu also noted that the central bank would be cautious about its approach to easing monetary policy too quickly, adding, “Besides inflation, better growth also reduces the need for immediate easing action by the MAS.”

Singapore will announce its 2024 budget on February 16 and economists will be looking for signs of any shift in government priorities.

Singapore has implemented near-term austerity measures to deal with high living costs and reduce inflation. HSBC expects the new budget to address long-term priorities such as improving the workforce and boosting innovation.

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