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ASIA ECONOMY Singapore’s central bank leaves policy unchanged in first quarterly meeting of 2024

Singapore’s central bank, the Monetary Authority of Singapore (MAS), has chosen to maintain its current policies in the first quarterly monetary policy decision of 2024, as anticipated. The MAS confirmed its commitment to keeping the exchange rate policy band, known as the Singapore dollar nominal effective exchange rate (S$NEER), unchanged.

Unlike other central banks that adjust domestic lending rates, MAS opts for tweaking the exchange rates of its currency against major trading partners. This approach effectively sets the S$NEER within a policy band, the exact levels of which are undisclosed.

In a policy statement, MAS expressed its intent to closely monitor both global and domestic economic developments, staying vigilant for potential risks to inflation and growth. The central bank recently shifted to a quarterly release schedule for policy statements, with updates scheduled for January, April, July, and October.

MAS is optimistic about the country’s gross domestic product (GDP) for 2024, estimating growth between 1% and 3%. Preliminary data indicates a 1.2% growth in Singapore’s economy last year, with a particularly robust 2.8% increase in the fourth quarter.

Looking ahead, MAS foresees the Singaporean economy strengthening in 2024, with growth becoming more widespread. The central bank expects a gradual decline in MAS Core Inflation by the fourth quarter after elevated levels in the earlier part of the year.

MAS predicts core inflation to rise in the current quarter, partially influenced by the one-off impact of the 1%-point hike in the Goods and Services Tax (GST) implemented in January 2024. The central bank maintains its forecast for core inflation to average between 2.5% and 3.5% in 2024, in line with its October projection.

Economists are keeping a close eye on indications of when MAS might ease its monetary policy. Having concluded its tightening cycle in April 2023, MAS decisions are closely watched, especially given the U.S. Federal Reserve’s projection of at least three interest rate cuts for 2024. Some economists suggest a base case for MAS to begin easing in April, though potential risks, including core inflation, could influence a delay.

Singapore’s upcoming budget announcement for 2024 on February 16 is also eagerly awaited by economists. The budget is expected to provide insights into potential shifts in government priorities, with a focus on longer-term goals such as upskilling the labor force and promoting innovation. This announcement could offer additional clarity on Singapore’s economic direction.

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