Maybank’s latest economic analysis predicts that the Monetary Authority of Singapore (MAS) will maintain its current policy stance at the October meeting, primarily due to persistent core inflation and improving economic conditions. The central bank’s focus will likely remain on ensuring that inflation pressures are fully addressed before considering any easing. The analysis further suggests that a natural easing could occur as global interest rates decline, with SORA rates projected to drop to 2.2% by the end of 2025. This reflects broader expectations of US Federal Reserve rate cuts through 2024 and 2025.
Inflation
Inflation remains a key issue. Maybank expects core inflation to average 2.8% in 2024, driven by services inflation and business cost pass-throughs, before easing to 1.8% in 2025. Inflationary pressures are compounded by rising unit labor costs, particularly in the retail, food & beverage, and accommodation sectors. Though headline inflation is forecast to decrease below 2% by early 2025, policy-driven wage hikes and high business costs in the service sectors could continue to drive prices upward in the short term.
Monetary policy
Economic growth is a positive note, with Maybank upgrading its 2024 GDP forecast to 3.5%, driven by a recovery in electronics manufacturing, buoyant trade, and easing interest rates. The analysis predicts 3Q GDP growth to accelerate to 4.3%, with further momentum in key sectors like wholesale trade, transport, and financial activities. However, challenges persist in retail, F&B, and real estate, where consumer spending is curbed, and private residential sales have slumped to multi-year lows.
Forecasts
Maybank forecasts that inflation and business cost pressures will subside by 2025, allowing MAS room to ease its policy stance next year. For now, the tightening labor market and sticky inflation keep the central bank’s hands tied.
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