MAS surprise on S$ also reflects low pricing power of local companies

THERE'S no questioning the wisdom of the Singapore central bank's move on Wednesday to ease monetary policy and let the Singapore dollar climb at a slower pace against its trading partners' currencies.

It came as a surprise. The Monetary Authority of Singapore (MAS) typically makes policy changes only twice a year at scheduled reviews in April and October. But as many analysts have pointed out, while the timing was surprising, the adjustment itself was not. After all, central banks round the world have had to respond to disinflationary pressures stemming from the plunge in global oil prices. Singapore's is at least the ninth this month to ease policy.

Apart from the inflation outlook, these changes in global monetary policies have made it less tenable for the Singapore nominal effective exchange rate to keep to the "slightly steeper" appreciation path that it has been on since April 2012.