The Monetary Authority of Singapore (MAS) is the country's central bank.
Its policy meeting is on Monday, October 14.
MAS is expected to hold policy steady:
- 9 out of 10 analysts polled by Reuters expect MAS to keep policy unchanged at April 15 meeting
- Inflation remains sticky at 2.7% y/y in August, down from 5.5% peak in early 2023
- GDP growth rebounded to 2.9% y/y in Q2 2024, prompting upgraded forecasts
- Geopolitical tensions and extreme weather keeping food and oil prices elevated
- Most analysts see potential easing pushed to 2025 as MAS waits for a clearer inflation picture
- Some analysts point to the falling SORA (Singapore Overnight Rate Average) interest rate alongside the US rate cuts, which can be seen as a de-facto easing.
- UOB is the sole outlier expecting slight S$NEER slope reduction next week
- MAS last tightened policy in October 2022, its 5th consecutive hike
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Note that the MAS's key monetary policy tool is its exchange rate policy. It adjusts the exchange rate of its dollar (SGD) instead of changing domestic interest rates like most other economies.
It manages the SGD exchange rate against a basket of currencies of Singapore's major trading partners.
- sets the path of the policy band of the Singapore dollar nominal effective exchange rate (S$NEER)
- this serves to strengthen or weaken the local currency against those of its main trading partners
S$NEER is a combined index made up of bilateral exchange rates between Singapore and its major trading partners
- is a trade-weighted exchange rate
MAS permits the S$NEER to move up and down within the policy band (exact levels are not disclosed). If it goes out of this band, the MAS steps in by buying or selling Singapore dollars.
The policy band has three parameters that the MAS can adjust:
- the slope, the level and the width
- adjusting the slope will influence the pace at which the Singapore dollar strengthens or weakens
- adjusting the level, or mid-point, of the policy band allows for an immediate strengthening or weakening of the S$NEER,
- widening the policy band allows for more volatility of the S$NEER
- these parameters are what are reviewed
The MAS made an unexpected announcement in October 2023 that it was switching to quarterly meetings to assess monetary settings from 2024. It had been meeting only twice a year, in April and October (but could, and did from time to time, meet more often, if conditions demanded an immediate change in settings, such as in 2022 when high inflation triggered two off-cycle moves).
