Image Credits - Reuters
The Monetary Authority of Singapore (MAS) has chosen to uphold its exchange rate-based monetary policy, announcing today its decision to keep the status quo for the third consecutive meeting. This aligns with market expectations and emphasizes the central bank’s commitment to stability in the face of evolving global economic conditions.
In its monetary policy statement, the Monetary Authority of Singapore has clarified that it will “maintain the prevailing rate of appreciation” of its Singapore dollar nominal effective exchange rate (S$NEER) policy band. This strategic move emphasizes the cautious approach taken by the Central Bank of Singapore in navigating the uncertainties of the economic landscape. Singapore’s measured response signals a commitment to ensuring a balanced and sustainable economic recovery.
The S$NEER policy band is a crucial tool for MAS, allowing the central bank to manage Singapore’s monetary policy by adjusting the exchange rate within a specified range. Meanwhile, there aren’t any changes to the width of the policy band and the level where it is centred. At the two policy reviews in the year 2023, the monetary policy remained unchanged. The last adjustment was a re-centering of the mid-point of its policy band – in 2022, in October. While the global economic outlook remains uncertain, Singapore’s resilient economic fundamentals and sound monetary policies have positioned it well to navigate challenges.
While mostly the central banks manage monetary policy through the interest rate, the Monetary Authority of Singapore manages by letting the local dollar rise or fall against its main trading partners’ currencies within an undisclosed band, called S$NEER. The adjustment is done by alternating the slope, mid-point, and also the width of the policy band. MAS is willing to adapt its policy stance as needed to address emerging risks and opportunities.
By laying out the outlook, the Monetary Authority of Singapore marked that the prospects for the economy of Singapore should continue to be better in the year ahead with the GDP (Gross Domestic Product) growth projected to come in between 1 per cent and 3 per cent. The stability in Singapore’s monetary policy is expected to give businesses and investors a sense of predictability, fostering confidence in the nation’s economic trajectory.