Singapore: MAS holds amid lower inflation - TDS

Mitul Kotecha, senior emerging markets strategist at TD Securities, points out that in the Singapore, the MAS kept the slope, width and centre of the currency band unchanged as expected, maintaining its policy of “modest, gradual appreciation of SGD” and after increasing the slope of the S$NEER band at the Oct 18 meeting.

Key Quotes

“The MAS revised lower its core inflation forecast to 1-2%, vs. 1.5-2.5% previously, in the wake of a a sharper decline in electricity prices due to the roll out of the Open Electricity Market. MAS kept the outlook for all items CPI unchanged at 0.5-1.5%.”

“The growth forecast was left unchanged, under the midpoint of 1.5-3.5%, with 2019 GDP slightly below potential. MAS acknowledged deceleration in trade related sectors, but highlighted other areas eg. ICT, which are more resilient. GDP came in at a lower than expected 2.0% q/q in Q1 19 (consensus 2.2% q/q), 1.3% y/y (consensus 1.4% y/y).”

“Given the inflation downgrade and downside risks to inflation we think the MAS will find it difficult to tighten further at the next meeting in Oct 19.”

“With SGD trading near the top of its NEER band we see downside risks to the currency going forward.”