Singapore keeps monetary policy steady as third-quarter growth picks up

Singapore keeps monetary policy steady as third-quarter growth picks up


A view of Singapore’s skyline and Marina Bay.

Fraser Hall | The Image Bank | Getty Images

Singapore’s central bank on Monday left its monetary settings unchanged, as expected, as data showed the economy perked up in the third quarter though analysts are betting on a loosening in policy early next year to guard against external risks.

The Monetary Authority of Singapore said it will maintain the prevailing rate of appreciation of its exchange rate-based policy band known as the Nominal Effective Exchange Rate, or S$NEER.

The width and the level at which the band is centered would also be maintained, the MAS said.

“The risks to Singapore’s inflation outlook are more balanced compared to three months ago,” MAS said in a statement, adding that growth momentum has picked up.

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Separately, advance trade ministry data earlier showed gross domestic product grew 4.1% year-on-year in the third quarter underpinned by a boost in manufacturing, accelerating from 2.9% in the second quarter, and policymakers expressed optimism about the 2025 outlook.

“The growth outlook is more sanguine,” said OCBC economist Selena Ling, but added that geopolitics and trade conflicts are concerns for the city state and that MAS has an opportunity to loosen policy at its next review in January.

Capital Economics markets economist Shivaan Tandon concurred, saying “the risk of keeping monetary policy too tight for too long will take center stage soon prompting the central bank to pivot”.

MAS said it expects the economy to grow at the upper end of the trade ministry’s adjusted GDP growth forecast range of 2.0% to 3.0% for 2024, but cautioned that external risks posed “significant” uncertainty for next year.

“A sharp escalation in geopolitical and trade conflicts could exert sizeable drags on global and domestic investment and trade,” the central bank said.

Singapore is often seen as a bellwether for global growth as its international trade dwarfs its domestic economy.

MAS expects core inflation to decline further to around 2% by the end of 2024.

Core inflation has tapered from a peak of 5.5% in early 2023, and hit a 2-1/2 year low of 2.5% in July before edging up to an annual 2.7% in August.

As a heavily trade-reliant economy, Singapore uses a unique method of managing monetary policy, tweaking the exchange rate of its dollar against a basket of currencies instead of domestic interest rates like most other countries.



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