Singapore’s central bank cut its forecasts for headline and core inflation this year but stuck to its tight monetary policy as expected on Tuesday, saying core inflation is likely to stay above its historical average over the next few quarters.
In a widely expected decision, the Monetary Authority of Singapore said it would maintain its policy of allowing a “modest and gradual” appreciation of the Singapore dollar, with no changes to the slope, width or centre of the policy band.
The central bank kept its policy unchanged even as economic growth in the third quarter came in below market expectations, with gross domestic product expanding 1.2 per cent from the previous quarter on an annualised and seasonally adjusted basis.
The median forecast in an analyst survey had been for quarter-on-quarter growth of 1.8 per cent.
“The Singapore economy should expand at a moderate pace in the quarters ahead. Wage inflation is likely to remain relatively firm, and businesses in food-related and some services sectors could further pass on cost increases,” the monetary authority said in its half-yearly statement.
“Consequently, [the authority’s] core inflation is projected to stay above its historical average over the next few quarters even as inflation remains subdued.”