THE Monetary Authority of Singapore's (MAS) October policy decision will keep the level of real GDP close to its potential over the medium term, and therefore help to promote price stability in the economy, said the central bank on Tuesday.
In its twice-yearly Macroeconomic Review, MAS gave more details of the factors which contributed to its recent monetary policy decision - namely, a softer-than-anticipated outlook for GDP growth and inflation.
On Oct 14, the central bank opted to retain the modest and gradual appreciation path for the S$NEER (Singapore dollar nominal effective exchange rate) policy band, while reducing its slope. No change was made to the width of the policy band and the level at which it is centred.
"(MAS Economic Policy Group's) estimates suggest that this optimal middle path between maintaining the policy status quo and adopting an even looser policy stance minimises macroeconomic volatility while promoting medium-term price stability. The measured policy move in October will therefore lead to comparatively more favourable growth and inflation outcomes for the Singapore economy," said MAS.
The central bank added that a more aggressive form of easing - including a flattening the slope of the S$NEER policy band - was "clearly unwarranted", since the economy was neither experiencing an outright retraction in economic activity, nor widespread price declines.