Singapore expected to keep monetary policy unchanged as growth outperforms

Monetary Policy Outlook - Singapore is expected to maintain its monetary policy unchanged in the upcoming review, supported by strong semiconductor export demand and controlled inflation [1] - Out of 16 analysts surveyed, 15 predict that the Monetary Authority of Singapore (MAS) will not make any changes this week, following previous unchanged settings in July and October [1] Economic Growth - Singapore's GDP growth for 2025 is projected at 4.8%, surpassing the government's earlier forecast of around 4.0% and previous estimates of 1.5% to 2.5% [2] - The electronics purchasing managers' index reading of 50.9 in December indicates sustained momentum in the tech cycle, with AI-related demand and rising memory chip prices expected to benefit the semiconductor sector [2] Inflation and Future Policy Actions - Stable core inflation at just above 1% in November has alleviated immediate pressure for policy easing, with expectations for MAS to tighten policy in April as inflation stabilizes and trade uncertainties diminish [3] - Economists from Bank of America suggest that MAS may tighten policy as soon as the upcoming review, citing signs of strengthening inflation based on December data [4] - MAS is anticipated to raise its core inflation forecast range for 2026 by 50 basis points to 1% to 2% from the current range of 0.5% to 1.5% [4] Price Trends - Recent data indicates that price increases in travel-related and other components have outweighed declines in raw food and beverage prices, which will be reflected in MAS's updated inflation forecasts [5] Monetary Policy Mechanism - Singapore manages its monetary conditions by adjusting the local dollar's value against the currencies of its main trading partners within an undisclosed trading band, known as the Singapore dollar nominal effective exchange rate (S$NEER) [5] - MAS adjusts its settings through three levers: the slope, mid-point, and width of the band [6]