The Monetary Authority of Singapore (MAS) is the country’s central bank.
The policy meeting is scheduled to be held on Monday, October 14.
MAS is expected to maintain policy stability:
- Nine out of 10 analysts polled by Reuters expect the Monetary Authority of Singapore to keep its policy unchanged at the April 15 meeting.
- Inflation remains steady at 2.7% y/y in August, down from a peak of 5.5% in early 2023.
- GDP growth rebounded to 2.9% year-on-year in the second quarter of 2024, raising expectations
- Geopolitical tensions and extreme weather have sent food and oil prices soaring
- Most analysts see potential easing pushed to 2025 as the Monetary Authority of Singapore awaits a clearer inflation picture.
- Some analysts point to the lower SORA (Singapore Overnight Average Rate) coupled with US interest rate cuts, which could be seen as de facto easing.
- UOB is the only party that expects a slight decline in the S$NEER slope next week
- The Monetary Authority of Singapore last tightened its policy in October 2022, the fifth consecutive hike
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Note that the main monetary policy instrument of the MAS is exchange rate policy. It adjusts the exchange rate of the Singapore Dollar (SGD) rather than changing local interest rates like most other economies.
It manages the exchange rate of the Singapore dollar against a basket of currencies of Singapore’s major trading partners.
- Sets the policy band path for the Singapore dollar nominal effective exchange rate (S$NEER)
- This strengthens or weakens the local currency against the currencies of its major trading partners
S$NEER is a joint index consisting of bilateral exchange rates between Singapore and its major trading partners
- It is the commercially weighted exchange rate
MAS allows S$NEER to move up and down within the policy range (exact levels not disclosed). If it goes outside this range, the Monetary Authority of Singapore intervenes by buying or selling Singapore dollars.
The policy scope has three parameters that MAS can adjust:
- Slope, level and width
- Adjusting the slope will affect the pace at which the Singapore dollar strengthens or weakens
- Adjusting the level, or midpoint, of the policy range allows the S$NEER to be immediately strengthened or weakened,
- The widening of the policy scope allows for greater volatility in the Singapore dollar (S$NEER) exchange rate.
- These parameters are what are reviewed
The Monetary Authority of Singapore made an unexpected announcement in October 2023 that it would switch to quarterly meetings to assess monetary settings from 2024. It had previously met only twice a year, in April and October (but could have met more frequently I did it from time to time.) , if conditions require an immediate change in settings, as happened in 2022 when rising inflation triggered two off-cycle moves).