The Monetary Authority of Singapore on Tuesday surprised markets by keeping its currency policy unchanged, saying that it expects the economy to grow at a moderate pace and that inflation is likely to remain subdued this year. The decision marks a pause in the rash of easing so far this year, as central banks from China to India have cut interest rates to boost growth. Last week, Australia also surprised markets by leaving its interest rate unchanged at 2.25%.
Singapore’s central bank cited a slightly improved global economic outlook and benign prices as the reasons for keeping its policy steady. Separately, the government reported the economy grew 2.1% on year in the first three months of this year, the same pace as the fourth quarter last year. It also reported growth of 1.1% in the first quarter of this year, on an adjusted and annualized basis, compared with 4.9% in the fourth quarter of last year.
Weak exports and subdued inflation prompted many economists to expect the central bank would ease policy for the second time this year, after it set the local dollar on a slower pace of appreciation against a basket of currencies of Singapore’s key trading partners in a surprise review of policy in January. Seven out of eight analysts in a Wall Street Journal poll predicted that the central bank would ease again.