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Quick takes: MAS may extend neutral S$ policy stance to October 2017

Thursday, April 13, 2017 - 10:01

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The Monetary Authority of Singapore (MAS) said on Thursday it would retain the neutral policy stance of zero per cent appreciation of the S$NEER (Singapore dollar nominal effective exchange rate), adding that such a stance is needed for an "extended period".

THE Monetary Authority of Singapore (MAS) said on Thursday it would retain the neutral policy stance of zero per cent appreciation of the S$NEER (Singapore dollar nominal effective exchange rate), adding that such a stance is needed for an "extended period".

Before the announcement, many economists had expected MAS to leave its monetary policy stance unchanged. But with recent stronger economic data, they wondered if MAS would tweak its assessment on whether the stance was still needed for an extended period of time.

Here's what some of them said after the announcement:

Nomura analysts:

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Market voices on:

"We have not observed any strong signals for a policy shift in October 2017 (or even possibly April 2018) and we maintain our view to be short S$NEER, given all the regional and global political/policy/macro risks that remain on the horizon...

"Today's dovish bias by MAS suggests that a significant compression of SGD rates versus USD rates from current levels would largely depend on rise in US rates."

Selena Ling, head of treasury research & strategy, OCBC Bank:

"In our view, the extended period for monetary policy will extend to at least October 2017. Our house forecast remains at 2 per cent for GDP growth and one per cent and 1.6 per cent for headline and core inflation forecasts respectively. The green shoots remain less than broad-based and inflationary pressures are mainly arising from higher oil prices and domestic policy-driven pricing pressures."

Ng Weiwen, economist, Australia and New Zealand Banking Group:

"Though overall domestic and external economic conditions have improved since the last review, MAS kept the 'extended period' wording today, consistent with our expectations.

"In our assessment, the improvement in the global and domestic outlook so far is not sufficient to warrant a shift in stance or tone. We are also cautious about the extent of any rebound in growth."

Vaninder Singh, Asia economist, NatWest Markets:

"We continue to view a re-centring (from MAS) as being necessary. Only much stronger growth data compared to now will change this view.

"With weaker growth, inflation in any case will not be a concern, despite the cost-push effect from higher utility prices. The statement notes: 'demand-driven inflationary pressures will likely be restrained'. As it is, recent upticks in Singapore's inflation are almost entirely down to commodity price increases and supportive base effects. Non-tradable inflation has barely budged."

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