Monetary policy maintained as MAS looks ahead to economic recovery

However, the money supply chiefs are aware that pandemic risks remain.

The Monetary Authority of Singapore (MAS) has decided to maintain the monetary policy for at a 0% per annum rate, the same level as during the COVID-19 pandemic.

"The Singapore economy will grow at an above-trend pace this year, but the sectors worst hit by the crisis will continue to face significant demand shortfalls. As the negative output gap narrows, core inflation should rise gradually from its current subdued levels but remain below its historical average. MAS will therefore maintain a zero percent per annum rate of appreciation of the policy band. The width of the policy band and the level at which it is centred will be unchanged," it said in a statement.

The Singapore Dollar Nominal Effective Exchange Rate (S$NEER) policy band was kept at 0% per annum despite modest appreciation over the last six months as the Singaporean dollar fared better than other currencies during the pandemic. The three-month Interbank Lending Rate (IBOR) remained at 0.4%.

MAS backed its decision on the positive economic growth estimated by the Ministry of trade. After three consecutive quarters of decline, GDP rose by 0.2% in the first quarter.

"Singapore’s GDP growth this year is likely to exceed the upper end of the official 4–6% forecast range, barring a setback to the global economy," MAS said, stressing that possible new COVID-19 mutations and premature relaxation of social restrictions may derail this recovery.

On inflation, the MAS expects prices to continue to rise at a gradual pace, to fall within a 0-1% rate in 2021.

"Notwithstanding some upside risks to global price pressures, inflation in Singapore is projected to rise at a more gradual pace in H2 2021. While higher global oil prices will continue to pass through to domestic prices, surplus oil production capacity should cap further large price increases," it said.

The MAS is set to hold its next monetary policy meeting on October.