Singapore's central bank leaves policy unchanged at its first quarterly meeting of 2024

“The Monetary Authority of Singapore will closely monitor global and local economic developments, and will remain vigilant towards risks to inflation and growth,” the central bank said in a statement. Policy statement.

Unlike other central banks that adjust their domestic lending rates, the Monetary Authority of Singapore chooses to adjust its currency exchange rates. The central bank strengthens or weakens its currency against the currencies of its major trading partners, thus effectively setting the effective exchange rate for the Singapore dollar. The exact exchange rate has not been specified, but rather the exchange rate of the Singaporean national currency can move within the specified policy range, the exact levels of which have not been disclosed.

Starting this year, the Monetary Authority of Singapore switched from reviewing its monetary policy twice a year to issuing quarterly statements. It indicated that it will issue data in January, April, July and October.

The central bank also said it expects the country's GDP to improve in 2024, and estimates growth between 1% and 3%. Preliminary data in early January showed that Singapore's economy grew by 1.2% last year, but recorded a 2.8% year-on-year increase in the fourth quarter, its fastest pace of the year.

“Barring any further global shocks, Singapore's economy is expected to strengthen in 2024, with growth becoming more broad-based. MAS core inflation is likely to remain high in the first part of the year, but should gradually decline and step down by the fourth quarter.” “Before it declines further next year,” MAS said.

Core inflation is expected to rise in the current quarter “partly due to the one-time impact of the 1% GST increase from January this year,” the Monetary Authority of Singapore said. Singapore raised the goods and services tax by one percentage point on January 1.

The central bank estimates core inflation will average between 2.5% and 3.5% in 2024, unchanged from its forecast in October. Excluding the impact of the GST increase, core inflation is expected to range between 1.5% and 2.5%.

Prior to the Monetary Authority of Singapore's decision, Goldman Sachs had indicated that any significant rise in global commodity prices or rising business costs could pose an inflation risk, in addition to a rise in the goods and services tax.

Economists will be watching for any clues about when Singapore's central bank will start easing monetary policy.

Singapore's central bank ended its monetary policy tightening cycle in April after five consecutive tightening decisions.

While inflation has shown signs of easing throughout 2023, core inflation remains steady.

At its December meeting, the US Federal Reserve predicted at least three interest rate cuts for 2024. Central banks around the world often follow the Fed's lead, and economists will be watching the Fed's decisions to gain insight into… When could it start relaxing its own policy? .

“Our base case is for the Monetary Authority of Singapore to start easing in April, at the earliest,” Yun Liu, an Asean economist at HSBC, told CNBC's Squawk Box Asia.

But Liu said there were still risks that could delay the central bank's easing until later this year, “and one of them is core inflation.”

“I think this really reminds the market that we are not out of the woods yet… and there are actually more looming upside risks to inflation in Singapore if we consider a one-percentage GST increase,” Liu said.

Singapore will announce its 2024 budget on February 16 and economists will be looking for signs of any shift in the government's priorities.

Singapore has implemented near-term support measures to deal with rising costs of living and ease inflation. HSBC expects the new budget to address long-term priorities, such as improving workforce skills and promoting innovation.