Standard Chartered analysts are maintaining their view that the Monetary Authority of Singapore (MAS) may reduce the Singapore dollar nominal effective exchange rate (SGD NEER) slope by 50bps on 14 October.
Key Quotes
“We expect no change to the width and centre of the SGD NEER policy band. We estimate the current slope at +1% per annum, with the width at +/-2% on either side of the policy band.”
“We will watch for the MAS’ 2020 core inflation forecast in its semi-annual October policy meeting statement. We think the MAS may provide a forecast range of 1-2% for 2020. A projection of 0.5-1.5% would raise the risk of a move to a flat slope in 2020.”
“The risk to our call would be skewed towards easing by 100bps to bring the SGD NEER policy band slope to 0%. Our base-case remains a slight easing of 50bps for the following reasons: (1) the MAS lowered its 2019 core inflation forecast range only mildly in the latest monthly inflation report, (2) it maintains its view that labour-market conditions have largely held up, although the latest assessment was a touch more dovish; and (3) employment in domestically oriented sectors has held up and overall unit labour costs have continued to rise.”
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