Further easing expected by the MAS – UOB

UOB Group’s Economist Barnabas Gan and Senior FX Strategist Peter Chia give their views on the potential easing measures by the Monetary Authority of Singapore (MAS) next month.

Key Quotes

“The Monetary Authority of Singapore (MAS) is slated to announce its monetary policy decision in April 2020. MAS previously reduced its S$NEER slope by an estimated 0.5% in Oct 2019, while keeping other policy parameters unchanged.”

“We identify three drivers that could lead to another round of monetary easing in the upcoming meeting, seen from (1) lower interest rates globally, (2) the softness in the S$NEER below its mid-point and (3) a likelihood of a persistent negative output gap in 2020.”

“We reiterate our base case call for MAS to ease policy to neutral, down from a currently perceived +0.5% appreciation slope. This is predicated on the recent deterioration in economic fundamentals. There is also a growing risk that S$NEER band could be re-centred lower.”

“There is an increasing risk for the MAS to announce an off-cycle meeting before its April schedule, although this is not our base case. The last time MAS did an off-cycle monetary policy meeting was back in January 2015, where policy-makers reduced the slope while keeping other policy parameters unchanged.”