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SINGAPORE: MAS On Hold, Central Bank States Inflation Risks More Balanced

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As widely expected, the MAS left Singapore's monetary policy levers unchanged. The slope, the width and the level at which the currency band is centred were all left unchanged. This was both the sell-side consensus and our own firm bias. 

  • The MAS painted a fairly resilient picture for the growth backdrop, which was also underpinned by the advance estimates for Q3 GDP (+2.1%q/q growth and +4.1%y/y, both slightly above consensus forecasts). The central bank expects 2024 growth to be in the upper half of the projected 2-3% range. It also projects the output gap to have closed in H2 of this year.
  • Next year growth is forecast to be around potential, but with considerable uncertainty facing the outlook, largely due to the external backdrop. 
  • Given this has helped fuel stronger than expected growth, particularly on the tech side, offshore developments will be a close watch point for the MAS.
  • On inflation, the central bank noted the continued slowdown in core inflation pressures and that we should end the year around 2% (versus 4.2% in 2023) (avg for this year 2.7%). For 2025 core inflation is expected to average 1.5-2.5%. The MAS noted inflation risks are more balanced compared to 3 months ago (the July meeting). It had a slightly higher projection for average inflation in 2024 (2.5-3.5%) at the July policy meeting.
  • Overall, it feels like the central bank is slowly getting more comfortable with the inflation backdrop. This could result in easier policy settings in 2025, although much is likely depend on the growth backdrop and whether the current positive momentum slows. 
  • In terms of market reaction, USD/SGD sits off its highs for the session. We got to 1.3077 prior to the meeting, but now sit back under 1.3060. Broader USD sentiment has softened though, so that has likely helped.
  • The SGD NEER, per Goldman Sach estimates, was around -0.45% from the top end of the band prior to the announcement. We now sit higher, last near -0.27% from the top end of the band. 
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As widely expected, the MAS left Singapore's monetary policy levers unchanged. The slope, the width and the level at which the currency band is centred were all left unchanged. This was both the sell-side consensus and our own firm bias. 

  • The MAS painted a fairly resilient picture for the growth backdrop, which was also underpinned by the advance estimates for Q3 GDP (+2.1%q/q growth and +4.1%y/y, both slightly above consensus forecasts). The central bank expects 2024 growth to be in the upper half of the projected 2-3% range. It also projects the output gap to have closed in H2 of this year.
  • Next year growth is forecast to be around potential, but with considerable uncertainty facing the outlook, largely due to the external backdrop. 
  • Given this has helped fuel stronger than expected growth, particularly on the tech side, offshore developments will be a close watch point for the MAS.
  • On inflation, the central bank noted the continued slowdown in core inflation pressures and that we should end the year around 2% (versus 4.2% in 2023) (avg for this year 2.7%). For 2025 core inflation is expected to average 1.5-2.5%. The MAS noted inflation risks are more balanced compared to 3 months ago (the July meeting). It had a slightly higher projection for average inflation in 2024 (2.5-3.5%) at the July policy meeting.
  • Overall, it feels like the central bank is slowly getting more comfortable with the inflation backdrop. This could result in easier policy settings in 2025, although much is likely depend on the growth backdrop and whether the current positive momentum slows. 
  • In terms of market reaction, USD/SGD sits off its highs for the session. We got to 1.3077 prior to the meeting, but now sit back under 1.3060. Broader USD sentiment has softened though, so that has likely helped.
  • The SGD NEER, per Goldman Sach estimates, was around -0.45% from the top end of the band prior to the announcement. We now sit higher, last near -0.27% from the top end of the band.