MAS could have more frequent monetary policy statements: Credit Suisse

The Monetary Authority of Singapore could move to having more frequent policy monetary statements given the more uncertain macroeconomic outlook, said Credit Suisse Economic Research on Thursday.

We "see a good chance that the MAS will officially announce more frequent monetary policy statements, for instance shifting to quarterly monetary policy statements instead of the current semi-annual framework", it said.

"This will help the MAS to take into account the more uncertain macroeconomic outlook and more volatile markets. Constraining itself to the current semi-annual policy announcements could inhibit the MAS from making necessary shifts to policy should economic activity continue to shift substantially," it said.

The MAS has two monetary policy reviews each year, in April and October.

In a surprise move in late January, the MAS decreased the slope of its S$NEER (nominal effective exchange rate), while maintaining its policy of a modest and gradual appreciation of the S$NEER policy band.

The MAS uses the exchange rate as a monetary policy tool - unlike other central banks which use interest rates. It can make adjustments to exchange rate policy in three ways: the slope, width, and the midpoint or level of the policy band.

Since the January move, the speculation from analysts and currency traders has intensified - over what the MAS will do in April and how that would affect the level of the Singapore dollar.

"Global macroeconomic conditions seem to be terminally volatile," said Ray Farris, Credit Suisse research analyst, arguing that it is worth considering by the MAS to have more frequent policy statements.

Many central banks make announcements more frequently, "close to monthly", he said.

The US Federal Open Market Committee has 8 meetings a year, the European Central Bank has 9-10 and Bank Negara has six.

Senior officials from the Australian central bank make frequent announcements until markets are "kind of conditioned" on what to expect, he said.

Mr Farris admits that the MAS by using the exchange rate as a monetary policy tool has a harder time and volatility of the currency is likely to increase with more frequent statements initially, until the system gets used to it.

"It's much easier for central banks to manage an interest rate target, it's a domestic interest rate, they can have absolute control over their (country's) monetary base.

"To control the exchange rate is more difficult, you are dealing with international markets which are bigger than the domestic one," said Mr Farris.