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Senior FX Strategist Peter Chia and Economist Barnabas Gan at UOB Group gave their opinion on the probable decision by the MAS to ease its monetary conditions later this month.

Key Quotes

“The Monetary Authority of Singapore (MAS) has announced its intention to announce its monetary policy committee (MPC) meeting decision on the 14 October 2019… We expect MAS to ease monetary policy by lowering the policy slope by 0.5% point from a currently estimated 1.0% appreciation. This would reverse one of the two steepening moves made in 2018. There is also a risk that MAS may ease the policy slope all the way to neutral, a signal that a looser monetary policy is needed to cushion both inflation and growth risks into 2020″.

“ASEAN economic fundamentals remained soft since our last update on the trade tensions and its impact to ASEAN. Manufacturing and trade momentum in Singapore and the region continued to stay lacklustre to-date. Singapore, being an export-oriented economy and a price-taker, remains vulnerable to the ongoing US-China trade tensions. Singapore’s output gap has turned negative since 4Q18 and is at risk of remaining so for the rest of 2019″.

“Coupled with the relatively poorer economic backdrop, the weakening of the S$NEER would likely come to pass, as seen during the early 2000s recession and the Global Financial Crisis of 2008/9. In the run up to 14 October’s MAS policy meeting, a weaker SGD could be in place that would guide the S$NEER lower in anticipation of a looser monetary policy”.