Singapore’s central bank keeps monetary policy steady

Monetary Authority of Singapore policy statement, leaves policy on hold, as expected:will maintain the prevailing rate of appreciation of the S$NEER policy band There will be no change to its width and the level at which it is centredMore:core inflation should average between 2.5%-3.0% for 2024 as a whole core inflationshould end the year around 2% core inflationmomentum is expected to remain contained in Q4 Singapore economyshould continue to expand at a steady pace and keep close to itspotential path in 2025 next year, theSingapore economy is currently forecast to expand at close to itspotential ratecore inflation isexpected to average around the mid-point of the forecast range of1.5-2.5% in 2025 for the year as awhole, MAS expects GDP growth to come in around the upper end of the2-3% forecast rangebased on thisoutlook, MAS assesses that the monetary policy settings are for nowstill consistent with medium-term price stability.CPI-all itemsinflation is forecast to average 1.5-2.5% as well in 2025core inflation hasstepped down but is anticipated to decline further to around 2% bythe end of 2024the risks toSingapore's inflation outlook are more balanced compared to threemonths ago---Note that the MAS's key monetary policy tool is its exchange rate policy. It adjusts the exchange rate of its dollar (SGD) instead of changing domestic interest rates like most other economies.It manages the SGD exchange rate against a basket of currencies of Singapore's major trading partners.sets the path of the policy band of the Singapore dollar nominal effective exchange rate (S$NEER)this serves to strengthen or weaken the local currency against those of its main trading partnersS$NEER is a combined index made up of bilateral exchange rates between Singapore and its major trading partnersis a trade-weighted exchange rateMAS permits the S$NEER to move up and down within the policy band (exact levels are not disclosed). If it goes out of this band, the MAS steps in by buying or selling Singapore dollars.The policy band has three parameters that the MAS can adjust:the slope, the level and the widthadjusting the slope will influence the pace at which the Singapore dollar strengthens or weakensadjusting the level, or mid-point, of the policy band allows for an immediate strengthening or weakening of the S$NEER,widening the policy band allows for more volatility of the S$NEERthese parameters are what are reviewed This article was written by Eamonn Sheridan at www.forexlive.com.