Singapore: MAS steepens the SGD NEER slope – Standard Chartered

Analysts at Standard Chartered note that the Monetary Authority of Singapore (MAS) decided to steepen the Singapore dollar nominal effective exchange rate (SGD NEER) slope slightly from its previous zero-percent appreciation stance.

Key Quotes

“The centre and width of the policy band was left unchanged. An important takeaway was the mention of the slope being increased slightly. We estimate the slope is now +50bps per annum.”

“With the latest MAS move and strong Q1-2018 GDP growth (for a fourth straight quarter), we see scope for the MAS to increase the slope by 50bps in October.”

“After the removal of its previous guidance of maintaining a neutral policy stance for an extended period, it is harder to determine forward guidance in the monetary policy statements. We highlight a few key comments, however. First, the MAS said that it expects both headline and core inflation within the upper half of the forecast ranges of 0-1% and 1-2%, respectively – this marks the first change to its current projections. The MAS also noted that core inflation is likely to rise gradually in 2018 and 2019.”

“Second, the MAS said that domestic sources of inflation may increase, a possible acknowledgement of the pick-up in wages. Third, it noted the global cyclical upturn may be maturing. In this situation, the MAS may want a greater monetary policy buffer ahead of the next downturn, which means the monetary policy normalisation cycle may be short. Fourth, there was a nuanced mention that the latest measured policy adjustment takes into account ongoing trade tensions, which may allude to the probability of further moves once the trade situation clears. Overall, we view these reflections as supportive of another slight move by the MAS.”