Singapore: Monetary Authority of Singapore leaves rates unchanged in October
Latest bank decision: At its last quarterly monetary policy meeting of 2024 on 14 October, the Monetary Authority of Singapore (MAS) decided to maintain the prevailing rate of appreciation of the Singapore dollar’s nominal effective exchange rate (S$NEER) for a sixth consecutive meeting, as widely expected by market analysts. The Bank also left unchanged both the width of the policy band and the level at which it is set.
Monetary policy drivers: The key domestic factors influencing the MAS’s decision included moderating core inflation, which eased to 2.6% in July-August from 3.0% in Q2. Additionally, GDP growth is expected to have picked up in Q3, amid a more robust expansion in manufacturing output, particularly in the electronics industry. Moreover, an anticipated further slowdown in core inflation and economic growth likely rising close to its potential rate in the coming months and into 2025 supported the MAS’s decision to maintain the current monetary stance.
Policy outlook: The communiqué was void of explicit forward guidance, but the Bank continues to see risks to inflation as broadly balanced: Quicker-than-expected growth in labor costs amid robust economic activity poses an upside risk, while a significant downturn in the global economy poses a downside risk. Our panelists see policy easing starting in 2025. The Bank is set to reconvene in January.
Panelist insight: United Overseas Bank analyst Jester Koh expects the MAS to start its policy easing cycle in 2025:
“Our base case calls for a “slight” reduction (by 50bps) to the S$NEER slope either in the Jan or Apr 2025 MPS. We view our call as a step to restore monetary policy neutrality, to be consistent with trend growth and y/y core inflation returning to desired levels where the cyclically-neutral path of the S$NEER is associated with a positive rate of appreciation. Thereafter, we do not expect any further adjustments to the S$NEER slope settings for the rest of 2025.”
Similarly, DBS analysts Chua Han Teng and Philip Wee stated:
“We see USD/SGD moving into a lower 1.25-1.30 range in 2025. This outlook is based on our expectation for the DXY Index to decline into a 95-100 range from 200 bps of Fed cuts between now and 3Q25 to 3%. Although the Ministry of Trade and Industry has yet to announce its 2025 growth forecast, the MAS expects it to be close to the 2-3% potential rate.”