SINGAPORE--Singapore's central bank unexpectedly kept its monetary policy stance unchanged, citing cooling core inflation and the dimming economic growth prospects of the export-dependent nation.
The Monetary Authority of Singapore will maintain the prevailing rate of appreciation of the Singapore dollar nominal effective exchange rate policy band, as the current path of appreciation is sufficiently tight and appropriate for achieving medium-term price stability, it said in a statement Friday.
There will be no change to the width and the level at which the policy band is centered, the central bank said. This policy stance will continue to reduce imported inflation and help curb domestic cost pressures, it added.
Nine of the 14 economists polled by The Wall Street Journal had expected the MAS to tighten its policy. Five had anticipated that it would keep policy unchanged.
While Singapore's core inflation will stay high over the next few months as accumulated business costs continue to feed through to consumer prices, it should slow more "discernibly" in the second half of the year, the MAS said. For 2023, core inflation is expected to average 3.5%-4.5%, while overall inflation is projected to come in at 5.5%-6.5%, the central bank said.
Singapore's gross domestic product growth is tipped to moderate significantly this year, in line with the global goods and investment cycle downturn, the MAS said. The trade-related cluster is likely to contract further, while activity in the modern services sectors remains subdued, the central bank said. GDP growth is forecast to slow to 0.5%-2.5% in 2023 from 3.6% in 2022, it added.
The Singapore dollar weakened against the greenback after the MAS's announcement. The currency weakened to 1.3278 per U.S. dollar immediately after the news and was last trading at 1.3250.
The MAS's monetary policy is centered on Singapore's exchange rate, which it considers an effective tool for maintaining price stability in the small and open economy.