SINGAPORE, April 14 — The Monetary Authority of Singapore (MAS) will maintain the prevailing rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band.
“There will be no change to its width and the level at which it is centred. This policy stance will continue to reduce imported inflation and help curb domestic cost pressures,” it said in its Monetary Policy Statement today.
MAS formulates monetary policy by setting a path for S$NEER policy band to ensure price stability in the medium term.
The central bank said it would remain vigilant over developments in the economy and financial markets amid heightened uncertainty on both inflation and growth.
The prospects for Singapore’s gross domestic product (GDP) growth this year have dimmed, with the trade-related cluster expected to contract further and activity in the modern services sectors remained subdued.
“The pace of expansion in the domestic-oriented sectors should also moderate as higher consumer prices and interest rates restrain spending,” it said.
All in, MAS said Singapore’s GDP growth is projected to step down to 0.5-2.5 per cent in 2023 from 3.6 per cent last year.
“This below-trend pace of growth will cause the positive output gap at end-2022 to turn slightly negative this year,” it said.
Although inflation is still elevated, the central bank’s five successive monetary policy tightening moves since October 2021 have tempered the momentum of price increases.
“The effects of the monetary policy tightening are still working through the economy and should dampen inflation further,” MAS said.
With imported inflation turning more negative and core inflation expected to ease materially by end-2023, MAS has assessed that the current appreciating path of the S$NEER policy band is sufficiently tight and appropriate for securing medium-term price stability.
For 2023 as a whole, MAS said its Core Inflation is expected to average 3.5-4.5 per cent.
Monetary Policy Statements are issued twice a year, in April and October, to communicate MAS’ monetary policy decisions.
— Bernama
