MAS to remain monetary policy unchanged amid economic slowdown pressure

Source: Xinhua| 2019-04-12 14:33:25|Editor: Xiaoxia
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SINGAPORE, April 12 (Xinhua) -- The Monetary Authority of Singapore (MAS) will maintain its stance of a slightly tightening monetary policy by keeping the current rate of appreciation of the Singapore dollar unchanged amid economic slowdown pressure, according to its bi-annual monetary policy statement released on Friday.

The MAS would maintain the Singapore dollar's nominal effective exchange rate (S$NEER) policy band, its width and the level at which the band is centered unchanged. It noted that the policy stance is consistent with a modest and gradual appreciation path of the S$NEER policy band that will ensure medium-term price stability.

The MAS decided to adopt a tightening policy by slightly raising the policy band of the S$NEER to allow moderate appreciation of the Singapore dollar since April 2018, which marked an end to a two-year neutral-policy stance and the first monetary tightening in six years. The MAS further raised the S$NEER policy band in October 2018.

The MAS statement said that the Singapore economy is likely to remain on its steady expansion path in the quarters ahead while the MAS core inflation, which excludes the costs of accommodation and private road transport, will experience modest but continuing pressures.

Due to weaker global oil prices and a stronger impact from the liberalization of the domestic retail electricity market, the core inflation has edged down. Therefore, MAS has downgraded its 2019 forecast range for MAS core inflation to 1-2 percent from the previous prediction of 1.5-2.5 percent.

Singapore's Ministry of Trade and Industry announced the advance estimates on Friday that the country's gross domestic product (GDP) expanded by 1.3 percent year-on-year in the first quarter of 2019, slowing down from the 1.9-percent growth in the fourth quarter of 2018 mainly due to less contribution from the manufacturing sector. The GDP growth is expected to run slightly below the mid-point of the 1.5-3.5 percent forecast range in 2019, the MAS estimated.

Selena Ling, head of Treasury Research&Strategy of the OCBC Bank, said that the MAS' move to maintain the slight appreciation of the Singapore dollar is within expectation. She said with external inflation pressures likely to be benign as global oil prices ease from 2018 levels and food prices to only pick up slightly on average, the domestic inflation picture comes to the forefront.

"Until we see a clear bottom and subsequent improvement in the China and global growth prospects, the overall picture for the Singapore economy remains cautious," she noted.

As a result, the OBCB revised its full-year 2019 GDP growth forecast to 1.8-2.0 percent on a yearly basis, with a headline and core inflation tipped at 0.5 percent and 1.5 percent year-on-year respectively.