MAS On Hold As Expected, USD/SGD Little Changed

The MAS left its policy settings unchanged. The central bank maintained the current pace of SGD NEER appreciation, while the width and the level at which the band is centered were also left unchanged. This was as expected per the market consensus.

• The inflation outlook is likely to be key in terms of a potential MAS easing at some stage in the future.
• The central bank, in its accompanying statement noted: "MAS Core Inflation is expected to step down more discernibly in Q4 this year and into 2025. For 2024 as a whole, MAS Core Inflation is expected to average 2.5–3.5%."
• Headline CPI is now projected at an average of 2.5% for this year, down from the previous forecast 3.0%. This reflects lower than expected private transport costs.
• Inflation risks are balanced. Upside risks rest with any positive domestic demand surprises and geopolitical risks, while downside pressures may come from a weaker global backdrop if interest rates are held higher longer than anticipated.
• Importantly the MAS stated: "The prevailing rate of appreciation of the policy band will keep a restraining effect on imported inflation as well as domestic cost pressures, and ensure medium-term price stability."
• Any easing may not be forthcoming until further signs of core inflation moving towards or at 2%y/y.
• On the growth side, the MAS noted: ""Growth momentum in the Singapore economy should improve in the second half of 2024. GDP growth is likely to come in closer to its potential rate of 2–3% for the full year. "
• USD/SGD is little changed post the result, last near 1.3425/30, down slightly as broader USD sentiment has softened. the SGD NEER (per the Goldman Sachs estimate) is slightly higher at -0.38% from the top end of the policy band (we ended Thursday trade at -0.43%).