Singapore eases monetary policy for first time in 3 years

16-Oct-2019 Intellasia | Reuters | 6:02 AM Print This Post

Singapore’s central bank eased monetary policy for the first time in three years on Monday (October 14), as widely expected, as the city-state’s bellwether economy narrowly dodged recession.

Like other trade-reliant Asian economies, Singapore’s economy has been hit hard by the escalating US-China trade war and a broader global slowdown, pushing its manufacturing sector into contraction and weighing on business confidence.

The Monetary Authority of Singapore (MAS) manages monetary policy through exchange rate settings, rather than through interest rates as other central banks do, letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed policy band.

MAS said it would lower slightly the slope of the Singapore dollar’s policy band, known as the nominal effective exchange rate or S$NEER, a shallower easing than some had expected. The width and level at which the band was centred were left unchanged.

The Singapore dollar rose slightly against the US dollar on the day.

“It’s a slight reduction in the rate of appreciation. They did not say the policy was neutral so it suggests that the slope is still positive,” said Barclays economist Brian Tan.

“We may be on track for further easing. Our base case is that if growth weakens, then they have to do something again,” Tan added.

The last time MAS reduced the S$NEER policy band was in April 2016 when it was set at 0 per cent on cloudy growth and inflation outlook.

Singapore’s economy grew less than expected in the third quarter from the previous three months on an annualised basis, but avoided slipping into a technical recession, preliminary data showed on Monday.

Eleven economists polled by Reuters had all expected Singapore would join a global trend toward policy easing as international economic uncertainties mount.

MAS increased the slope of the policy band twice last year in efforts to control rising price pressures and strengthen its currency, in its first such tightening moves in six years.

But a prolonged tariff dispute between the United States and China two of Singapore’s biggest export markets has disrupted global supply chains in many trade-reliant economies, including the city state.

Manufacturing has been hit particularly hard, buffeted by the trade tensions and a cyclical downturn in the electronics sector.


Category: Singapore

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