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https://www.straitstimes.com/business/economy/economists-expect-mas-to-ease-sing-appreciation-in-oct
Economists expect MAS to ease Sing$ appreciation in October
As Singapore continues to see sluggish trade and growth data, with core inflation at a three-year low, economists are looking to the central bank to ease monetary policy in its upcoming review and provide some support to the economy.
Many expect the Monetary Authority of Singapore (MAS) to do so via a "slight" reduction in the Singdollar slope, which corresponds to a relatively weaker currency that can help to boost demand for tradable goods and services here.
MAS uses the exchange rate as its main monetary policy tool to balance between inflation from overseas and economic growth, and its next policy announcement is to be out no later than Oct 14.
The slight reduction, expected by analysts from at least five financial institutions, implies an annual appreciation of around 0.5 per cent for the Singdollar, down from current estimates of a 1 per cent annual appreciation.
Maybank Kim Eng economist Chua Hak Bin said that even though Singapore is likely to narrowly escape a technical recession, growth is still weak. This could come in at just around 0.2 per cent for the third quarter, just slightly better than the 0.1 per cent year-on-year expansion in the second quarter.
The labour market has been softening as well, and other Asean central banks such as those in Thailand, Indonesia and Vietnam, have already cut rates, he said.
OCBC currency economist Terence Wu added in a report that market focus has shifted from whether global central banks will cut rates to when and how deep rate cuts will be.
It is too early to expect a global growth rebound to carry the Singapore economy, he added.
"Without a concrete truce, interim or otherwise, to at least nominally lock down progress on (the trade war), the situation may be too fragile to generate sustained optimism," he said.
This suggests MAS might ease its monetary policy.
Barclays analysts Brian Tan, Ashish Agrawal and Abbas Keshvani added in a report this week that "the economy has clearly proven to be on shakier ground than the MAS had assumed when it left foreign exchange policy settings unchanged on April 12".
Back then, the Ministry of Trade and Industry expected full-year economic growth to come in slightly below the midpoint of a forecast range of 1.5 per cent to 3.5 per cent.
The range has been cut twice, and is now zero per cent to 1 per cent, with the final figure expected around the midpoint.
Most analysts, however, believe that any easing will take place gradually.
The Barclays analysts said: "With the outlook for US-China trade negotiations and Brexit shrouded in uncertainty, we believe the MAS will want to preserve the option to reduce the slope further in April if downside risks materialise."
They added that officials likely expect the economy to stabilise next year.
OCBC's Mr Wu also noted that taking a more drastic move would "imply an official economic prognosis that is considerably worse than our expectation, or expected to deteriorate rapidly from here".
Citi analysts Kit Wei Zheng and Ang Kai Wei, who also believe MAS is likely to take a "calibrated easing" approach, said that growth weakness is not very broad-based, while a strong pipeline of investment commitments suggests growth pessimism is more cyclical, rather than structural.
But Nomura believes that the worse-than-expected manufacturing output last month raises the likelihood of more drastic action.
"US-China trade talks, in the week of Oct 7, will be critical in gauging whether there will be a 'slight' easing versus a shift to a 'zero' slope," Nomura said yesterday. "If there is a temporary de-escalation, the MAS may decide to implement just a 0.5 per cent slope reduction, while an escalation would likely result in the more aggressive move."
Seow Bei Yi
Economists expect MAS to ease Sing$ appreciation in October
As Singapore continues to see sluggish trade and growth data, with core inflation at a three-year low, economists are looking to the central bank to ease monetary policy in its upcoming review and provide some support to the economy.
Many expect the Monetary Authority of Singapore (MAS) to do so via a "slight" reduction in the Singdollar slope, which corresponds to a relatively weaker currency that can help to boost demand for tradable goods and services here.
MAS uses the exchange rate as its main monetary policy tool to balance between inflation from overseas and economic growth, and its next policy announcement is to be out no later than Oct 14.
The slight reduction, expected by analysts from at least five financial institutions, implies an annual appreciation of around 0.5 per cent for the Singdollar, down from current estimates of a 1 per cent annual appreciation.
Maybank Kim Eng economist Chua Hak Bin said that even though Singapore is likely to narrowly escape a technical recession, growth is still weak. This could come in at just around 0.2 per cent for the third quarter, just slightly better than the 0.1 per cent year-on-year expansion in the second quarter.
The labour market has been softening as well, and other Asean central banks such as those in Thailand, Indonesia and Vietnam, have already cut rates, he said.
OCBC currency economist Terence Wu added in a report that market focus has shifted from whether global central banks will cut rates to when and how deep rate cuts will be.
It is too early to expect a global growth rebound to carry the Singapore economy, he added.
"Without a concrete truce, interim or otherwise, to at least nominally lock down progress on (the trade war), the situation may be too fragile to generate sustained optimism," he said.
This suggests MAS might ease its monetary policy.
Barclays analysts Brian Tan, Ashish Agrawal and Abbas Keshvani added in a report this week that "the economy has clearly proven to be on shakier ground than the MAS had assumed when it left foreign exchange policy settings unchanged on April 12".
Back then, the Ministry of Trade and Industry expected full-year economic growth to come in slightly below the midpoint of a forecast range of 1.5 per cent to 3.5 per cent.
The range has been cut twice, and is now zero per cent to 1 per cent, with the final figure expected around the midpoint.
Most analysts, however, believe that any easing will take place gradually.
The Barclays analysts said: "With the outlook for US-China trade negotiations and Brexit shrouded in uncertainty, we believe the MAS will want to preserve the option to reduce the slope further in April if downside risks materialise."
They added that officials likely expect the economy to stabilise next year.
OCBC's Mr Wu also noted that taking a more drastic move would "imply an official economic prognosis that is considerably worse than our expectation, or expected to deteriorate rapidly from here".
Citi analysts Kit Wei Zheng and Ang Kai Wei, who also believe MAS is likely to take a "calibrated easing" approach, said that growth weakness is not very broad-based, while a strong pipeline of investment commitments suggests growth pessimism is more cyclical, rather than structural.
But Nomura believes that the worse-than-expected manufacturing output last month raises the likelihood of more drastic action.
"US-China trade talks, in the week of Oct 7, will be critical in gauging whether there will be a 'slight' easing versus a shift to a 'zero' slope," Nomura said yesterday. "If there is a temporary de-escalation, the MAS may decide to implement just a 0.5 per cent slope reduction, while an escalation would likely result in the more aggressive move."
Seow Bei Yi
...and dotard will win again coming election 
