(Bloomberg) -- Singapore’s central bank kept its monetary policy settings unchanged on Friday, striking a dovish tone as economic growth slows and inflation stays low.
After tightening policy twice last year, the Monetary Authority of Singapore -- which uses the exchange rate as its main policy tool -- left the slope and width of the currency band unchanged, as well as the level at which it is centered. The stance is “consistent with a modest and gradual appreciation path” of the currency band, it said in a statement on its website.
Twenty of the 22 economists surveyed by Bloomberg predicted the move, with just two predicting a tightening.
“Growth in the Singapore economy has eased, bringing the level of output closer to its underlying potential,” the MAS said. “Despite some pickup in labor costs, inflationary pressures are mild and should remain contained.”
The Singapore dollar weakened after the decision, dropping 0.1 percent to S$1.3575 against the U.S. currency as of 8:25 a.m. on Friday.
Central banks globally have taken an abrupt turn toward more dovish policy in 2019, led by a change in tone from the U.S. Federal Reserve. World growth forecasts have been repeatedly downgraded, including by the International Monetary Fund this week, as U.S.-China trade tensions remain heightened and as Chinese demand ebbs.
Growth Slows
The government is projecting growth in the export-reliant economy will slow to just below the midpoint of the 1.5 to 3.5 percent range after a 3.2 percent pace in 2018. A separate report Friday showed gross domestic product grew 1.3 percent in the first quarter from a year ago, and rose an annualized 2 percent from the previous quarter, lower than economists had projected.
“The Singapore economy has slowed, and is likely to expand at a modest pace in the coming quarters,” the MAS said in its statement. “The pace of growth will be slightly below potential this year, following two years when it was above trend.”
The MAS guides the local dollar against a basket of its counterparts and adjusts the pace of its appreciation or depreciation by changing the slope, width and center of a currency band. It doesn’t disclose details of the basket, or the band or the pace of appreciation or depreciation.
A subdued inflation outlook is also giving policy makers room to hold off on more tightening. Consumer prices rose 0.5 percent in February from a year ago, up slightly from 0.4 percent in the previous month.
The MAS downgraded its core inflation forecast range for this year to 1 percent to 2 percent from 1.5 percent to 2.5 percent previously, largely because of a drop in electricity costs. In February, the central bank lowered its headline inflation projection to 0.5 percent to 1.5 percent.
Central banks across Asia are pausing or mulling interest-rate cuts. India lowered rates twice this year already, while Malaysia is seen as next in line to ease after policy makers cut growth forecasts last month.
(Updates with comment from MAS fourth paragraph.)
