• The Monetary Authority of Singapore (MAS) will maintain the prevailing rate of appreciation of the Singapore dollar amidst global economic uncertainties.
• Singapore's growth is expected to be sustained by the ongoing upswing in the electronics and trade cycles, with inflation expected to remain contained.
• Unlike other central banks, MAS uses the S$Neer policy band to manage inflation, balancing against the risk of a too-strong Singdollar.
• This decision marks the sixth consecutive time MAS has left its policy unchanged, signaling a focus on domestic economic conditions and inflation expectations.

The Monetary Authority of Singapore (MAS) has made a significant announcement that it will maintain the prevailing rate of appreciation of the Singapore dollar. This decision comes at a time when the economy is expected to pick up growth momentum and inflation is anticipated to step down. The announcement, made on October 14, 2024, underscores the resilience of the Singaporean economy amidst global economic uncertainties.

The global economy remains broadly resilient, and Singapore's growth is expected to be sustained by the ongoing upswing in the electronics and trade cycles, along with easing global financial conditions. MAS has noted that the growth is expected to come around the upper end of the 2 per cent to 3 per cent forecast range. This growth projection is in line with the reports from Xinhua news agency.

Inflation, a key factor in monetary policy decisions, has been decreasing in recent months in Singapore. Core inflation, which excludes private transport and accommodation costs to better reflect household expenses, is expected to remain contained in the fourth quarter.

Singapore's Inflation Outlook

MAS anticipates that the core inflation should end the year around 2 per cent and average between 2.5 per cent to 3.0 per cent throughout this year, down from 4.2 per cent in 2023. Looking ahead to 2025, the core inflation is expected to average around the mid-point of 1.5 per cent to 2.5 per cent amid moderate underlying cost pressures. This projection indicates a moderation in price increases, which is a positive sign for the economy.

The decision to maintain the appreciation rate of the Singapore dollar nominal effective exchange rate policy band is consistent with medium-term price stability based on these outlooks. This approach underscores the MAS's commitment to price stability and a managed exchange rate regime as a key tool for monetary policy, which differs from the interest rate adjustments favored by many central banks.

Singapore's Monetary Policy in Global Context

In the context of global monetary policies, the Monetary Authority of Singapore's decision stands out, especially considering the actions of other central banks. Unlike other central banks, MAS uses the S$Neer policy band to manage inflation. It guides the local dollar against a basket of currencies of its major trading partners to crimp the cost of imports. It has to balance this against the risk of a too-strong Singdollar that would make exports more expensive to overseas markets and deter tourists from visiting Singapore.

The decision to maintain its currency policy, amidst a backdrop of global central banks either cutting rates or easing policies, highlights its confidence in the resilience of the Singaporean economy. It also signals a focus on domestic economic conditions and inflation expectations rather than following a synchronized global trend.

This announcement marked the sixth consecutive time MAS opted to leave its policy unchanged. MAS stated that the current monetary policy remains consistent with its long-term goal of price stability. No changes were made to the band's width or the level at which it is centred.

The parameters of this band, including its slope, mid-point, and width, are adjusted as necessary to maintain economic stability, although the exact band levels are not disclosed to the public.