The Monetary Authority of Singapore announced a shift to quarterly monetary policy announcements starting in 2024, moving from its previous practice of at least two reviews per year. The central bank stated this change allows policymakers to provide economic assessments more promptly.
Singapore's central bank employs a distinctive method for monetary policy, focusing on the exchange rate of the Singapore dollar rather than domestic interest rates. The MAS sets the path for the Singapore dollar nominal effective exchange rate policy band, influencing the currency's strength against major trading partners.
Singapore operates as a small, trade-dependent economy where exports and imports exceed three times its gross domestic product. Approximately 40 cents of every Singapore dollar spent domestically goes toward imports, making exchange rates more influential on inflation than domestic interest rates.
The S$NEER represents an index of the Singapore dollar's trade-weighted exchange rate against currencies of the island's main trading partners. The central bank indicates this approach allows the Singapore dollar to perform collectively in relation to these partners, affecting general price levels in Singapore.
MAS does not establish precise exchange rate levels or control rates in real time. Instead, the S$NEER fluctuates within an undisclosed policy band, with intervention occurring only when movements exceed this range through buying or selling Singapore dollars.
The policy band features three adjustable parameters: slope, level, and width. Modifying the slope affects the pace of Singapore dollar strengthening or weakening. Adjusting the level enables immediate currency shifts for situations like recessions. Widening the band permits greater S$NEER volatility.
Until 2024, MAS reviewed these parameters at least twice annually, typically in April and October. Additional reviews could occur when conditions required immediate adjustments, such as in 2022 when high inflation prompted two off-cycle policy moves.