Singapore Central Bank Maintains Monetary Policy

Singapore’s central bank left its monetary policy unchanged on Wednesday as the economy rebounded from a technical recession in the third quarter.

The Monetary Authority of Singapore decided to maintain a zero percent per annum rate of appreciation of the S$NEER policy band. The width of the policy band and the level at which it is centered will be unchanged.

Signaling that the policy will remain loose for an extended period, the central bank said an accommodative policy stance will remain appropriate for some time, as core inflation is set to stay long.

The MAS applies the exchange rate against a basket of currencies within an undisclosed band as its monetary policy tool.

With GDP still well below its pre-crisis level, the MAS is likely to maintain its accommodative stance for at least the next year, Alex Holmes, an economist at Capital Economics, said.

Prakash Sakpal, an ING economist said there is no room for complacency on the policy front with the fiscal policy continuing to do the heavy-lifting to support the recovery going forward.

Although the economy is expected to see a recovery next year, the bank said the underlying growth momentum will be weak and the negative output gap will only narrow slowly in the year ahead.

Both MAS core inflation and overall consumer price inflation are forecast to come in between -0.5 and 0 zercent in 2020. In 2021, core inflation will average 0-1 percent, while headline inflation is projected to be between -0.5 and 0.5 percent.

The city-state economy is forecast to contract by 5-7 percent this year, and record above-trend growth for 2021 due to the effects of the low base in 2020.

The advance estimates from the Ministry of Trade and Industry, released Wednesday, showed that gross domestic product expanded 7.9 percent sequentially in the third quarter, ending two consecutive quarters of contraction.

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