Singapore: MAS leaves policy band unchanged at April meeting
April 20, 2017
At its first scheduled semi-annual meeting of 2017, which took place on 13 April, the Monetary Authority of Singapore (MAS) decided to leave the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band unchanged at zero percent. The MAS also left both the width of the policy band and the level at which it is centered unchanged. The decision met market expectations and represented the continuation of an easing cycle which is designed to spur economic growth and support inflation. The slope has been kept at a zero percent appreciation rate since April 2016, against a backdrop of subdued inflationary pressures and GDP growth.
Following October’s monetary policy meeting, the S$NEER fluctuated around an appreciating trend, which in February was fueled by a weakening USD. As for consumer prices, both core inflation and CPI edged up in the January-February period, pushed up mainly by higher prices for oil-related items, although inflationary pressures remained subdued. At the same time, the pace of economic expansion has remained moderate, with recently released figures for Q1 signaling a modest year-on-year slowdown in GDP growth. In the absence of any substantial change in domestic economic conditions, the MAS opted to stay put.
The overall tone of the communique was quite dovish, signaling that the easing cycle is likely to continue for an extended period of time. A number of risks to the growth outlook persist: the uneven nature of the recovery—with domestic-focused industries still weak—a subdued labor market and weak consumer sentiment, as well as global policy uncertainty. Inflation will likely return this year on the back of higher oil prices and administrative price hikes, but domestic demand pressures should remain muted. Therefore, the MAS maintained its CPI inflation target for 2017 at 0.5%-1.5%. The next meeting is scheduled for mid-October 2017.