Singapore: MAS increased its FX policy slope “slightly” – Nomura

Analysts at Nomura note that the Monetary Authority of Singapore (MAS) has further increased the slope of S$NEER appreciation “slightly”, which Nomura estimate to be an 0.5% increase to a 1.0% annualised pace of appreciation.

Key Quotes

“The MAS maintained the current S$NEER policy band width and midpoint. Given the policy shift was somewhat in line with consensus (twelve out of 21 analysts; Bloomberg, 10 October) and our view, the immediate USD/SGD and S$NEER reaction was limited.”

“Specifically on the policy statement, the MAS provided a benign growth outlook, highlighting that the “Singapore economy is likely to remain on its steady expansion path in the quarters ahead, keeping output slightly above potential.”

“Given the overall benign outlook from the MAS, we believe the policy door has been left open. A further “slight” tightening is possible at the next policy meeting, given the MAS has highlighted a positive output gap and some underlying inflation pressures (though expected to ease below 2% over the medium term). However, we believe that, if global conditions were to worsen significantly, the MAS could pause or even ease if necessary.”