In April 2018, MAS took a step towards monetary policy normalisation by increasing slightly the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band, with no change to its width or the level at which it was centred. MAS made a further slight increase in the slope of the S$NEER policy band in October 2018.
In April 2019, MAS kept unchanged the policy stance that was adopted in October 2018.
- Global economy: The world economy showed signs of stabilising in early 2019 after a sharp slowdown around the turn of the year, but the recent re-escalation in trade tensions has added to downside risks. The balance of risks remains tilted to the downside, and manufacturing and exports remain generally weak. As such, the world economy is expected to grow more slowly in 2019 than in 2018. Meanwhile, global inflation has remained benign amid muted demand-side pressures.
- Singapore economy: Against a more subdued external backdrop, the Singapore economy grew at a slower but still firm 3.1% in 2018, from 3.7% in the previous year. In 2019, Singapore faces stronger headwinds, as the negative impact of the maturing economic and tech cycles become more evident. Following two years of above potential growth, the Singapore economy is expected to grow at the slower pace of 1.5–2.5% in 2019.
- Inflation: In 2018, MAS Core Inflation increased modestly to 1.7% from 1.5% in the previous year. This came amid continued improvement in the labour market, while underlying price pressures remained in check. For 2019, MAS Core Inflation is expected to come in within the forecast range of 1–2%. Meanwhile, CPI-All Items inflation is expected to average 0.5–1.5% in 2019. This is higher than the 0.4% recorded in 2018, reflecting the more gradual decline in accommodation and private road transport costs compared to 2018.
- Monetary policy: The April 2018 exit from the flat (i.e., zero percent appreciation) policy band, which had been in place since April 2016, was assessed to be appropriate as the Singapore economy was on track for a steady expansion in 2018 and mild upward pressures on core inflation were expected given the improvement in the labour market. The further increase in the slope of the policy band, consistent with a modest and gradual appreciation path of the S$NEER policy band, was carefully calibrated against the backdrop of persistent uncertainties in the external environment. With inflationary pressures expected to be contained, the unchanged policy stance in April 2019 will keep the economy close to potential and ensure medium-term price stability in the Singapore economy.