MAS maintained monetary policy settings in July due to persistent upside risks to near-term inflation. Economic outlook improvements reduced urgency for easing, with potential for easing in H1 2025.
Key View
- As we and the consensus were expecting, the Monetary Authority of Singapore (MAS) maintained all monetary policy settings in its July review.
- Upside risks to near-term inflation have persisted, and the improved economic outlook has reduced the urgency for the MAS to ease. We expect the central bank to stand pat in its next policy review in October.
- Further declines in inflation in 2025 and our forecast for the Fed to start cutting rates in September will provide MAS with the space to ease in H1 2025.
On July 26, the Monetary Authority of Singapore (MAS) left unchanged the mid-point, slope and width of the Singapore dollar nominal effective exchange rate (SGDNEER) policy band as we and the consensus expected (see chart below). The MAS revised its 2024 forecast for headline inflation from an average of 2.5-3.5% to 2.0-3.0% to reflect the larger-than-expected declines in private transport costs over the last few months. However, the central bank maintained its forecast for core inflation, which excludes accommodation and private transport costs, at 2.5-3.5%.
Singapore’s monetary policy is projected to remain unchanged in 2024, marking a stance of prudence amidst global economic uncertainties. The Monetary Authority of Singapore (MAS) has indicated that, given the stable inflation rates and balanced growth trajectory, there is no compelling need for monetary easing. By maintaining the current policy, MAS aims to support sustainable growth while keeping inflationary pressures under control, reflecting a cautious optimism about the economic outlook.
This decision aligns with Singapore’s reputation for robust economic management and forward-looking policies. The city-state has weathered numerous global economic storms by maintaining a sound fiscal foundation and proactive regulatory measures. With global markets facing volatility and central banks worldwide grappling with inflationary pressures, Singapore’s decision to hold steady on monetary policy underscores its commitment to economic stability and resilience.
Businesses and investors are likely to interpret this stance as a signal of confidence in the underlying strength of Singapore’s economy. By refraining from monetary easing, Singapore sets a clear expectation of stability, potentially attracting more foreign investment and fostering an environment of confidence within both local and international markets. Thus, Singapore’s approach serves not only as a domestic economic strategy but also as a statement to global markets about its economic fortitude.
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