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Economist Barnabas Gan and Head of Markets Strategy Heng Koon How, CAIA at UOB Group gave their view on the recent decision by the MAS on monetary policy.

Key Quotes

“The Monetary Authority of Singapore (MAS) eased its monetary policy by reducing the rate of appreciation of the S$NEER policy band “slightly”, while keeping the width of the band and the level at which it is centered unchanged”.

“Singapore avoided a technical recession in the third quarter of 2019, with growth at 0.1% y/y and 0.6% q/q saar. Even as 2Q19 growth has been revised upwards to -2.7% q/q saar (up from -3.3%), growth in the manufacturing and services sectors have been downgraded to -3.3% y/y (from -3.1% y/y) and +2.8% y/y (from +2.9% y/y)”.

“However, official rhetoric surrounding inflation has turned relatively softer, with core inflation now expected to print at the “lower end” of the 1 – 2% range, compared to the previous guidance for core inflation to come in at the “lower half”. Headline inflation has also been downgraded to “around 0.5%”, from the previous expectation for it to “average 0.5 – 1.5%” in 2019″.

“Growth is expected to pick up “modestly” in 2020 although the output gap is expected to stay negative into the next year. Inflation is also expected to see a pickup from MAS outlook of “around 0.5%” to “average 0.5 – 1.5%” in 2020 as well. Our view is for MAS to keep its policy parameters (slope, width, center) unchanged in the next April 2020 MPC meeting“.