Will MAS keep its policy parameters unchanged for the whole year?

Experts estimate the S$NEER to be at +1.5% appreciation gradient, with +/- 2.0% band.

Following the Monetary Authority of Singapore’s (MAS) decision to keep its policy parameters unchanged in January, an expert believes this approach is likely to continue throughout 2024.

Barnabas Gan, acting group chief economist of RHB, said inflation risks and a resilient economic backdrop will likely persuade MAS to keep its policy parameters unchanged in 2024.

“There is no impetus for the MAS to tweak its policy parameters for the year ahead,” Gan said.

“We think the current policy parameters are appropriate for dampening imported inflation and ensuring medium-term price stability. The S$NEER, according to our in-house estimation, has been well-behaved since the announcement of today’s MAS policy decision,” Gan added.

According to data from RHB, the Singapore dollar nominal effective exchange rate (S$NEER) is currently trading at +1.6% above the midpoint, similar to how it has been trending since the start of this year.

“[Such] suggests that the S$NEER is relatively rich and, thus, limited imported inflation effects via a stronger SGD and there is ample headroom, ~0.4% towards the 2.0% handle, for the S$NEER to appreciate to ensure price stability,” Gan said.

RHB also expects the US Fed Fund Rates (FFR) to peak at 5.25% – 5.50% and rate cuts by 2H24.

“Based on these factors, there is no impetus for the MAS to tighten or loosen policy at the upcoming monetary policy meeting,” Gan said.

Gan said MAS will only tighten should there be higher inflation pressures in 2024.”

In January, MAS kept its monetary policy statement (MPS) unchanged. RBH estimates the S$NEER to be at +1.5% appreciation gradient, with +/- 2.0% band.

Gan believes “policymakers were optimistic on both global and domestic GDP growth outlook,” thus the decision to retain current parameters.