Singapore: MAS ends its hiking cycle

UOB Group’s Senior Economist Alvin Liew and Senior FX Strategist Peter Chia review the latest MAS decision on its monetary policy conditions.

Key Takeaways

“MAS Apr 2023 MPS – The Monetary Authority of Singapore (MAS), in its scheduled monetary policy statement (MPS) release on Fri (14 Apr), announced it was maintaining the prevailing rate of appreciation of the S$NEER policy band, with no change to the width of the policy band and the level at which the policy mid-point is centred. This is the first time MAS has kept policy unchanged after five preceding rounds of policy tightening since Oct 2021.”

“MAS Inflation & Growth Assessment – The MAS provided a downbeat assessment for growth as it noted “Singapore’s GDP growth is projected to moderate significantly this year, in line with the global goods and investment cycle downturn.” The MAS projects Singapore’s GDP to ease below trend growth to 0.5%-2.5% (from 3.6% in 2022) and the output gap to turn slightly negative in 2023 with risks to global and Singapore’s growth tilted to the downside. The MAS kept its inflation forecasts (that were first made in the 14 Oct 2022 MPS) unchanged in today’s Apr statement. The two notable differences this time is that the MAS explicitly stated “MAS Core Inflation is projected to reach around 2.5% y-o-y by the end of 2023” and it sees both upside and downside risks to inflation.”

“MAS Outlook – Tightening Cycle Is Over, Status Quo For Oct: Overall, the MAS took the prudent approach and kept policy unchanged in Apr. We now expect the current tightening cycle to have ended and the MAS to maintain this pause in the next Oct meeting. If there is another off-cycle announcement before Oct, we think it will likely be due to a sudden worsening in external conditions leading to a sharp downgrade in growth outlook, so the MAS will likely shift to a more accommodative policy rather than further tightening in its next move, but that is not our base case to expect an off-cycle policy announcement for now.”

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