There are some expectations (minority) of policy change from the MAS in January

The MAS Survey of Professional Forecasters provides a summary of forecasts of Singapore’s key economic indicators by economists and analysts. The survey is conducted quarterly following the release of economic data for the previous quarter by the Ministry of Trade and Industry.

Singapore central bank survey indicates the majority foresee no change in monetary policy settings in January, April, and July reviews.

• shows 33% expect a reduction in the slope of the S$NEER in the January monetary policy review, down from 50% previously.
• projects Singapore’s 2024 GDP growth at 3.6%, compared to 2.6% previously.
• forecasts Singapore’s 2024 core inflation at 2.9%, down from 3.0% previously.
• anticipates Singapore’s 2024 headline inflation at 2.5%, down from 2.6% previously.
• predicts Singapore’s Q4 2024 GDP growth at 3.1%, compared to 2.2% previously.
• estimates Singapore’s Q4 core inflation at 2.1%.

The MAS’ next Monetary Policy Statement is due on January 31, 2025.

The mooted reduction in the slope of the S$NEER (albeit by only a minority in this survey) would signal a more accommodative monetary policy stance. It would likely result in a weaker Singapore dollar, boost export competitiveness, and support economic growth, albeit at the potential cost of higher inflation.

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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

This article was written by Eamonn Sheridan at www.forexlive.com.