Growth concerns abound, but don't hold breath for monetary easing

WITH economic data continuing to disappoint and ministers warning Singaporeans to brace themselves for tougher times ahead, speculation has grown about what action, if any, the Monetary Authority of Singapore (MAS) will take at its next policy meeting in October.

Yet while easing of monetary policy might make sense as a growth measure, it would be noted that inflation remains the main focus of the MAS. There is ample reason to worry about growth. In May, non-oil domestic exports fell year-on-year for the third straight month amid continued trade tensions between the United States and China. The same month, industrial production fell 2.4 per cent year on year, worse than economists' predictions of a 1.8 per cent fall.

And ahead of flash figures for second-quarter growth, to be released next week, some are predicting a technical recession this year. Maybank Kim Eng analysts have, as their base case, a shallow technical recession in the third quarter. The probability of monetary easing in October will rise if a recession materialises and a US-China trade deal stays elusive, they add. OCBC Bank similarly sees a "not insignificant" probability of "taking back some of the earlier 2018 monetary policy tightening" if economic data continues to deteriorate.