Monetary Authority of Singapore stays cautious with inflation outlook, anticipates stronger growth in 2024
The Monetary Authority of Singapore (MAS) decided to maintain its monetary policy settings on January 29, 2024, extending its pause from previous meetings. This decision aligns with market expectations, keeping the Singapore dollar nominal effective exchange rate (S$NEER) policy band unchanged. The central bank emphasized that its policy settings remain “appropriate” to dampen imported inflation and control domestic cost pressures.
In its updated forecast, MAS lowered its full-year headline inflation estimate to 2.5% to 3.5%, from the previous range of 3% to 4%. The decrease is attributed to a decline in Certificate of Entitlement (COE) premiums and a larger COE supply. However, the central bank maintained its core inflation forecast range of 2.5% to 3.5%, which excludes accommodation and private transport.
MAS also expressed optimism about Singapore’s economic outlook for 2024, stating that barring any global shocks, the economy is expected to strengthen and experience more broad-based growth. This outlook contrasts with its previous statement in October 2023, where it anticipated a gradual improvement. The economy grew by 1.2% year-on-year in 2023, with stronger performance in the final quarter. For 2024, the official growth forecast is 1% to 3%.
In terms of inflation, MAS expects core inflation to remain elevated in the early part of the year, driven by the impact of GST and carbon tax hikes. However, the central bank predicts a gradual decline in core inflation by the fourth quarter of 2024, aided by lower imported costs and slower domestic cost increases.
Economists anticipate that MAS will continue its current policy stance throughout 2024, unless inflation risks or economic conditions change unexpectedly. Although there is a possibility of further tightening, especially if inflation exceeds expectations, the general consensus is that MAS will likely stand pat, with easing possible in October 2024 if inflation moderates as anticipated.
