Key View
- The Monetary Authority of Singapore left policy settings unchanged at its January meeting.
- We expect the central bank to stand pat again in April given that a 1 percentage point increase in the GST will keep inflation elevated in the near term.
- Nonetheless, we expect headline inflation to ease to an average of 2.8% in 2024 due in part to increased vehicle permits which will reduce private transportation costs.
On January 29, the Monetary Authority of Singapore (MAS) kept the mid-point, slope and width of the SGDNEER policy band unchanged as we and the consensus had expected. Notably, the official forecast for headline inflation is now 2.5-3.5% in 2024, down from the previous range of 3.0-4.0%. This bodes well for our call for the MAS to start easing in H2 2024.
Outlook For Next Meeting
We expect the MAS to maintain the current policy settings at its next meeting in April. The key reason is that increases in the goods and services tax (GST) as well as carbon tax, which took effect in January 2024, will keep inflation elevated in the near term. Furthermore, declines in import prices have moderated since August 2023, which will limit the downside to inflation in the coming months (see chart below).
