Singapore Holds Steady on Monetary Policy as Inflation risks Persist

It is widely anticipated that the monetary policy of Singapore's central bank will remain unchanged next week, as they are likely to refrain from adjusting settings due to uncertainties in inflation and growth caused by geopolitical tensions.

"Oil prices have climbed from recent geopolitical tensions in the Middle East, while extreme weather conditions are still holding sway over food prices, which remain above pre-pandemic levels," said Moody's Analytics economist Denise Cheok.

"We see a reduction of slope of the S$NEER policy band in the first half of the year, while a more drastic move of bringing down the mid-point of the band might be on the cards in the second half of 2025, should imported inflation continue to step down discernibly."

Cheok predicts that MAS will probably only start to lower next year. Inflation continues to persist in the Asian financial center. Although it declined from 5.5 per cent earlier in 2023, it still stayed at 2.7 per cent year-over-year in August.

The central bank anticipates a more substantial decrease in core inflation in the last quarter, bringing it down to 2.5 to 3.5 per cent for the year. Singapore is frequently viewed as an indicator for worldwide expansion due to its foreign trade being much larger than its local economy.

Lee Yen Nee, a risk analyst at Fitch Solutions unit BMI, said: "The economy has been performing at close to its potential, which suggests that there is no hurry for the MAS to adjust its policy."