MAS Maintains Policy Settings, As Expected, Q1 GDP Below Expectations

As widely expected, the MAS maintained its current policy settings. The prevailing rate of S$NEER appreciation was maintained, while there were no changes to its width or the level at which it is centred. See this link for the full policy statement.

• Broader economic trends continue to evolve as the MAS expects. Economic growth is projected at 1-3% this year, the same as the forecast made in January. The inflation outlook was also the same as from the January policy meeting. Core inflation and headline inflation are forecast at 2.5-3.5%.
• Current policy settings are to be maintained to ensure a dampening of imported inflation and curbing of domestic price pressures.
• Core inflation is likely to remain elevated in the near term before falling in Q4 and then stepping down further in 2025. Our sense is that this is likely to dictate the timing of any policy easing, or reduced tightening by the MAS (outside of an economic shock).
• For growth, the recovery is expected is expected to broaden as 2024 unfolds and the slightly negative output gap from 2023 is expected to narrow as we progress through this year. However, this is not expected to add to inflationary pressures.
• Q1 GDP data came in weaker than expected (0.1% q/q, versus 0.5% forecast and 2.7% y/y, versus 3.0% forecast). the MAS noted, "Manufacturing and modern services activity saw some slowing in Q1 2024 after having expanded strongly in the preceding quarters. Growth in the consumer-facing sectors picked up in Q1, reflecting in part the boost from an increase in tourist arrivals."
• USD/SGD sits a touch higher post the meeting outcome, last near 1.35/3540, but broader USD sentiment has ticked higher in recent dealings. We are just shy of multi month highs above 1.3550. For the S$NEER, the Goldman Sachs Index remains close to -0.55% from the top end of the band, which is where we were prior to the policy outcome.