Monetary Authority of Singapore (MAS) maintains its current policy:
- The Singapore dollar nominal effective exchange rate (S$NEER) policy band will continue to appreciate.
- No changes to the width or center level of the policy band.
Additional points:
- Core inflation is expected to average 2.5%-3.0% in 2024.
- Core inflation should reach about 2% by the end of 2024.
- Inflation momentum is expected to remain stable in Q4.
- The Singapore economy is projected to expand steadily, staying close to its potential path in 2025.
- GDP growth for the year is forecasted at the upper end of 2-3% range.
- Core inflation should average around 1.5-2.5% in 2025.
- Consumer price index (CPI) inflation is also expected to average 1.5-2.5% in 2025.
- Inflation risks are now more balanced compared to three months ago.
Note: MAS’s key monetary policy tool is exchange rate management, rather than changing interest rates. They adjust the SGD exchange rate against a basket of currencies from major trading partners.
- MAS sets the path for the S$NEER policy band.
- This helps strengthen or weaken the SGD against those currencies.
- S$NEER is a trade-weighted index of the exchange rates.
- MAS allows fluctuations within the policy band; if the S$NEER moves outside this band, MAS intervenes by buying or selling SGD.
The policy band consists of three adjustable parameters:
- Slope, level, and width of the band.
- Adjusting the slope affects the rate of SGD appreciation or depreciation.
- Adjusting the level provides immediate changes to the S$NEER.
- Widening the band allows for more fluctuations of the S$NEER.