SINGAPORE – The Central Bank of Singapore on Wednesday (April 14) left the monetary policy framework unchanged, saying the accommodative stance was appropriate given the favorable inflationary outlook and global economic uncertainties caused by the pandemic.

However, the Monetary Authority of Singapore (MAS) was more optimistic about the official growth projections for 2021, while the data showed that the economy grew unexpectedly in the first quarter from a year earlier.

The central bank manages monetary policy through exchange rate adjustments rather than interest rates, allowing the local dollar to rise or fall within an undisclosed range against the currencies of its major trading partners.

Subject to a setback to the global recovery, the Singapore economy is likely to exceed the upper end of the official forecast range of 4 to 6 percent, the MAS said. However, the sectors hardest hit by the crisis will continue to face significant demand shortfalls, he added.

“With core inflation expected to remain low this year, MAS believes that an accommodative policy stance remains appropriate,” the central bank said in its statement.

The dollar in Singapore rose 0.2 percent after the political decision and better-than-expected data on gross domestic product (GDP).

The MAS expects core inflation, its preferred price indicator for setting monetary policy, to rise only gradually for the remainder of the year, reaching 0 to 1 percent in 2021. However, he raised his forecast for headline inflation to 0.5 to 1.5 percent from –0.5 to 0.5 percent previously.

The central bank uses three levers to adjust its policy: the slope, midpoint and width of the policy band, known as the Nominal Effective Exchange Rate or S $ NEER.

On Wednesday the MAS announced that it would keep the policy area’s annual rate of appreciation at zero percent. The width of the policy region and the level on which it is centered remain unchanged.


All 15 economists polled by Reuters had forecast that the MAS would leave its policy unchanged.

“As a result, continued weakness in the aviation, retail and hospitality sectors will hold back the recovery,” said Alex Holmes, an economist with Capital Economics. It assumes that the policy settings will remain unchanged for at least the next year.

GDP rose 0.2 percent from January to March year-on-year, official data showed on Wednesday. This surprised the economists, who had expected a drop of 0.2 percent.

Singapore, which has got its local virus situation under control and is rolling out vaccinations, is on a gradual recovery path after its worst recession last year. However, analysts say that external demand and the reopening of international borders are the keys to growth.

“The recovery in domestic demand is much stronger than expected,” said Lee Ju Ye, Maybank Kim Eng economist. She said there was a slim possibility that the central bank could tighten during its next policy review in October if the recovery gains momentum and inflation picks up.