SINGAPORE – Singapore’s central bank is widely expected to keep its monetary policy unchanged in April and hold off from easing its settings until inflation starts to ease significantly.

All 11 analysts polled by Reuters expect the Monetary Authority of Singapore (MAS) to hold off on making changes to its policy in the scheduled review on April 12.

“We expect MAS to hold its monetary settings steady at the April meeting. Although headline and core inflation have been on a bumpy downtrend, core inflation remains stubbornly above the central bank’s 2 per cent target,” said Ms Denise Cheok, an economist at Moody’s Analytics.

“Provided the inflation outlook stabilises, we see MAS loosening monetary settings in the second half of the year.”

Inflation in Singapore remains sticky. It cooled to 3.1 per cent in January before speeding up to a seven-month high of 3.6 per cent in February as seasonal effects from Chinese New Year drove services and food prices higher.

The Trade Ministry and central bank said in a joint statement in March that core inflation is expected to moderate over the rest of the year as import cost pressures decline and the labour market eases.

They projected both headline and core inflation to average 2.5 per cent to 3.5 per cent for 2024, unchanged from a previous official forecast.

Central banks globally are starting to reverse their rapid interest rate hikes. The Swiss National Bank made a surprise 25 basis point cut in March, and the European Central Bank is likely to follow in June.

Still, analysts expect reversals to be modest, with periodic pauses as central banks try to balance growth and inflationary concerns.

“History shows that MAS did not rush into easing after inflation peaked at previous cycles in the 2010s. Instead, the MAS maintained its appreciating policy stance on hold for a while,” OCBC analysts said in a research note.

‘No rush to relax policy’

Singapore is often seen as a bellwether for global growth, as its international trade dwarfs its domestic economy.

Its economic growth slowed to 1.2 per cent in 2023 from 3.6 per cent in 2022. Gross domestic product rose 2.2 per cent on a year-on-year basis in the fourth quarter, lower than an advance estimate of 2.8 per cent.

The Trade Ministry projects growth of 1 per cent to 3 per cent in 2024.

In a survey published by MAS in March, economists upgraded their 2024 growth forecast.

MAS left monetary policy unchanged in April and October 2023 and January 2024, reflecting growth concerns, having tightened policy at five consecutive reviews prior to that.

In 2024, MAS is making monetary policy announcements every quarter instead of semi-annually.

Instead of using interest rates, the central bank manages monetary policy by letting the local dollar rise or fall against currencies of its main trading partners within an undisclosed band, known as the Singapore dollar nominal effective exchange rate, or S$Neer.

It adjusts policy via three levers: the slope, mid-point and width of the policy band.

Maybank economists said policy easing will happen in October at the earliest, “via a gentler S$Neer slope”.

“There is no rush to relax monetary policy at this juncture, given an export-driven economic recovery and still-elevated inflation,” they said. REUTERS