MAS chief economist rules out off-cycle Singdollar tweaks
Singapore
SINGAPORE'S central bank will not make an unscheduled change to monetary policy, despite a fresh economic downgrade, chief economist Edward Robinson told reporters on Tuesday.
His comments come amid market watchers' growing confidence of easing at the mid-October policy meeting, with some also hoping for fiscal stimulus and more active market intervention.
Mr Robinson - who is also deputy managing director of economic policy at the Monetary Authority of Singapore (MAS) - said the MAS' stance has not changed since the last decision in April, when the central bank stood pat on the "modest and gradual appreciation" of the Singapore dollar. "MAS is not considering an off-cycle policy meeting," Mr Robinson told a morning briefing, as he reaffirmed the official forecast for full-year core inflation of one per cent to 2 per cent.
"We will be carefully monitoring developments and will take them into account in our assessment of the inflation and growth outlook for the Singapore economy at our next scheduled monetary policy review," he added.
Still, the MAS recently adjusted expectations for the labour market, saying last month that conditions there have "held up" after an earlier assessment that they "remained firm".
Terence Ho, divisional director of manpower policy and planning at the Ministry of Manpower, has now reiterated the ministry's view from a data advance release from late July.
The overall unemployment rate was steady at 2.2 per cent, as at end-June, against the previous quarter. But unemployment for Singapore residents rose from 3 per cent to 3.1 per cent as well. In this group, there were an estimated 64,300 jobless citizens - up from 62,200 in March.
Meanwhile, the workforce grew by 3,300 jobs on the previous quarter, down from 13,400 additions before.
"Going forward, given the headwinds mentioned on the economic front, we do expect some upward pressure on unemployment rates and also retrenchments," said Mr Ho. "So we're monitoring the situation very closely."
He replied, when asked, that he could not specify how much unemployment and lay-offs are expected to rise by, "but I think a lot will depend on the economic situation".
DBS senior economist Irvin Seah separately raised the spectre of a services sector slowdown spilling over into the labour market. Growth in services industries has eased each quarter from its latest peak in early 2018.
"Though there hasn't been any sign of mass retrenchment yet, policymakers need to stay vigilant and work closely with companies that could be struggling in order to mitigate the risk," said Mr Seah, while calling for a reinforcement of ongoing measures such as the Career Support Programme that will help citizen job seekers until end-March 2021.
But Kurt Wee, president of the Association of Small and Medium Enterprises, told The Business Times that he has not observed much softening on the ground when it comes to labour. "I don't think we have any broad-based employment problems at this point," he said, adding that small businesses "are very manpower-lean, so I don't think there is a lot of fat" to trim.
Another factor at play is the looming cut to foreign worker quotas in the services sector - no more than 38 per cent of headcount from next January, down from 40 per cent now.
Selena Ling, head of treasury research and strategy at OCBC Bank, said that deterioration in the labour market "is likely to be gradual rather than knee-jerk", especially with the foreign worker quotas to be tightened.
But the impending quota cuts "could still keep MAS wary of underlying cost pressures", Citi analysts Kit Wei Zheng and Ang Kai Wei added.
Otherwise, private economists expect the MAS to loosen its position on the Singdollar at the October meeting. "The question is whether a slope flattening is still the most likely outcome or an even more dovish move... should also come into the realm of consideration," said Ms Ling.
