MAS Holds Steady, Core Inflation Expected To Fall Gradually

The MAS left all of its policy parameters unchanged at the January meeting. The slope, width and mid-point of the currency band unchanged. This was widely expected by the consensus and was our own firm bias.

• The accompanying statement was fairly optimistic about the growth outlook. The central bank noted, "Prospects for the Singapore economy should continue to improve in 2024, with GDP growth projected to come in between 1–3%."
• A further recovery in the electronics sector and easier policy settings global should support external demand. This should a further normalization in terms of domestically orientated growth.
• The inflation backdrop is expected to show continuing easier momentum as we progress further into 2024. This is after the impact of the January GST hike subsides. "MAS Core Inflation is projected to slow to an average of 2.5–3.5% for 2024 as a whole, unchanged from the October 2023 MPS. Excluding the impact of the increase in the GST rate this year, core inflation is forecast at 1.5–2.5%."
• "CPI-All items inflation in 2024 is now forecast to be lower at 2.5–3.5%, down from the previous range of 3–4%. Excluding the effects of the increase in the GST rate, headline inflation is forecast at 1.5–2.5%." This reflects expected lower COE prices.
• Importantly, core inflation is expected to fall in the later stages of this year and into next.
• This is ultimately likely to pave the way for easier policy settings, which would be in line with expected global trends.
• However, the April meeting may be too soon for such a shift as the central bank highlighted balanced risks for both the growth and inflation backdrops as we progress through this year.