MAS keeps monetary policy on hold after tightening twice this year

SINGAPORE: The Monetary Authority of Singapore (MAS) kept monetary policy unchanged on Wednesday (Oct 14), contrary to analysts' expectations. It also narrowed the core inflation forecast to 1.5 to 2 per cent, from a previous prediction of 1.5 to 2.5 per cent.

The central bank said the Singapore economy should continue to expand at a firm pace in the immediate quarters ahead before moderating as the artificial intelligence boom eases from its exceptional pace.

Core inflation is projected to ease discernibly from the middle of next year, MAS added.

"MAS will therefore maintain the rate of appreciation of the policy band. There will be no change to the width of the band and the level at which it is centred," the central bank said.

The current appreciating policy band will allow the Singapore Dollar Nominal Effective Exchange Rate to strengthen and lean against the anticipated near-term rise in imported inflation, ensuring the gradual easing of inflationary pressures in 2027, said MAS.

It added that it is well positioned to respond effectively to risks to medium-term price stability and will continue to monitor economic developments closely.

All 10 analysts polled by Reuters ahead of Wednesday expected MAS to tighten policy, meaning the Singapore dollar would be allowed to strengthen more, helping to reduce imported inflation.

Unlike other central banks, which usually rely on interest rates, Singapore's monetary policy is managed through the exchange rate. The MAS lets the Singapore dollar strengthen or weaken against the currencies of the country's main trading partners within an undisclosed band.

The band's slope, mid-point and width can be changed to make adjustments to policy.

The central bank increased the rate of appreciation of the policy band in April and July, with the second increase being smaller than the first. The width of the policy band and the level at which it is centred were left unchanged both times.