Central bank expected to maintain current policy settings, with potential easing in the second half of the year
Economists predict that Singapore’s Monetary Authority (MAS) is likely to maintain its current monetary policy settings at its upcoming review, with some speculating that policy easing may only occur in July. MAS has not adjusted its policy in over a year, following a series of tightening moves from October 2021 to October 2022.
Despite recent inflationary pressures, including a rebound in the consumer price index (CPI) in February, economists suggest that there is no immediate need for policy changes. According to Maybank economists, the MAS is likely to keep the current settings to guide core inflation down to 2% by early next year, given the country’s export-driven economic recovery and persistent inflation.
Some analysts, including Christopher Wong from OCBC, have emphasized that the recent inflation uptick was likely influenced by seasonal factors like the Chinese New Year and remains within the expected inflation range set by policymakers. This dampens speculation that MAS may ease its policy soon.
Other economists, such as Kit Wei Zheng from Citi, have pointed out that the ongoing negative output gap and cooling labor market will likely keep MAS from adjusting its stance for now.
Looking ahead, analysts such as those from DBS Group Research and UOB economists predict that MAS may consider policy normalization in July if core inflation continues to ease. They expect inflation to moderate in the second half of the year due to factors such as a fading GST hike impact and slowing domestic labor costs.
Though there are low odds of steepening the policy slope, economists agree that MAS will likely maintain a cautious approach until further clarity on inflation trends emerges.
