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Quick takes: MAS disappoints calls for more aggressive S$ easing

Wednesday, October 14, 2015 - 10:19
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Singapore's central bank eased monetary policy a little on Wednesday, by "slightly" reducing the Singapore dollar policy band's slope.

SINGAPORE'S central bank eased monetary policy a little on Wednesday, by "slightly" reducing the Singapore dollar policy band's slope.

The market had been expecting a more aggressive easing stroke - either through a downward recentring or flattening of the band.

Here's what economists have to say about the October monetary policy statement, which made no change to the width of the policy band and the level at which it is centred:

Mizuho economist Vishnu Varathan: "MAS unleashed half a surprise. While policy was eased as was widely expected, it disappointed the majority's call for step depreciation. Even our non-consensus slope flattening call half-missed the 'slight' slope reduction, the second one this year."

DBS Group Research: "With an almost flat growth in 3Q '15 and full-year inflation expected to be negative, the easing is in line with the current underlying fundamentals. However, the next meeting is six months down the road. And risks remain in the horizon with potential capital flight that could result from higher US interest rates and/or fears of further yuan devaluation amid a dreary global outlook."

UOB Global Economics & Markets Research: "We think that this translates to a 0.5 per cent reduction to the slope, from the previous one per cent slope. This is the second monetary easing this year, with the first one during the off-cycle policy move in January.

"The central bank's move is deemed a cautious one, as the impact of a reduction of the S$NEER (Singapore dollar nominal effective exchange rate) slope will be spread over a longer term, rather than the more controversial outright downward shift in the midpoint, that was expected by us. With this 'slight' easing, it seems that the MAS wants to see the SGD appreciating at an even slower pace, and we still hold on to our view that the USD/SGD will likely end this year at 1.43."