MAS likely to further tighten policy in April after “less aggressive” Oct tightening: analysts

This marks the fourth time in 2022 that MAS tightened its policy.

The Monetary Authority of Singapore will have to maintain a “hawkish” policy tone until price pressure begins to ease, according to analysts, signaling that another further monetary policy tightening may take place in April 2023.

“We expect the MAS to tighten again at the April 2023 meeting, probably via another recentering,” said Maybank analysts Chua Hak Bin and Lee Ju Ye, noting that there is considerable room left for further appreciation, with the S$NEER still over 0.5% above the midpoint of the newly recentered band.

Singapore’s financial regulator tightened its policy for the fourth time this year in October–the fifth since October 2021–mainly to combat soaring inflation. In their latest policy move, MAS opted to re-centre the currency band to prevailing levels but kept the slope and the width of the band unchanged.  

This was a lot less aggressive than expected, according to Nicholas Mapa, Senior Economist at ING. “We had expected a more aggressive move,  but Singapore's central bank believes that today’s move will build on past tightening carried out since October 2021 to reduce imported inflation and curb  domestic cost pressures,” he said.

However, given the outlook for inflation, the MAS will at  least need to retain its hawkish tone until price pressures finally show signs of moderating, Mapa added.

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Elevated commodity prices and resurgent domestic demand have pushed Singapore’s core inflation past 5%YoY, which in turn prompted MAS to enact policy tightenings in January, April and July of this year as well. For the full-year of 2022, MAS forecasts a core inflation of 4%, whilst inflation is expected to come aet 3.5% to 4.5% for the following year.

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