THE Monetary Authority of Singapore (MAS) defied the majority of expectations on Tuesday, keeping its monetary policy stance unchanged.
It has kept the Singapore dollar on a "modest and gradual" appreciating path, with no change to the slope and width of the policy band and the level at which it is centred.
In its half-yearly monetary policy statement, the central bank said that the Singapore economy is evolving "as envisaged" in the January monetary policy statement, with GDP and inflation forecasts remaining unchanged.
The economy is on track to grow at 2 to 4 per cent in 2015, while headline inflation is still projected to come in at -0.5 to 0.5 per cent, and core inflation at 0.5 to 1.5 per cent.
Said MAS on Tuesday morning: "External price pressures should be contained, while domestic cost pass-through to consumer prices is expected to be moderate this year. Beyond the near term, underlying cost and price pressures could pick up, given the continued tightness in the labour market.
"MAS will therefore maintain the policy of a modest and gradual appreciation of the S$NEER policy band. There will be no change to the slope and width of the policy band, and the level at which it is centred. This policy stance is consistent with the benign inflation outlook and moderate growth prospects for the whole of 2015, and appropriate for ensuring medium-term price stability in the economy," the central bank added.
On Jan 28, MAS had surprised with an off-cycle policy statement - decreasing the slope of its S$NEER (Singapore dollar nominal effective exchange rate) band.
Since the central bank's move in January, the S$NEER has fluctuated within the lower half of the policy band, according to MAS. It depreciated over February to mid-March amid the broad-based strength of the US dollar; more recently, the S$NEER has strengthened.
Prior to Tuesday morning's half-yearly monetary policy statement, economists had been split on how the central bank would tweak its Singapore dollar policy - or whether it would even change its stance at all - swayed partly by recent movements in the S$NEER.
As for the economy, according to advance estimates released on Tuesday by the Ministry of Trade and Industry (MTI), Singapore's GDP growth slowed to 1.1 per cent in Q1 2015 on a quarter-on-quarter, seasonally adjusted annualised basis. This was far slower than Q4 2014's 4.9 per cent quarter-on-quarter expansion, as Q1's performance was pulled down by a contraction in the manufacturing sector.
In year-on-year terms, the Singapore economy grew by 2.1 per cent - the same rate of growth as that achieved in the previous quarter.