2019.10.1323:44:00UTC+00Singapore Central Bank Loosens Monetary Policy; Signals More Easing

Singapore central bank loosened its monetary policy for the first time since 2016, and signaled more easing if prospects of inflation and growth weaken significantly.

The Monetary Authority of Singapore decided on Monday to reduce slightly the rate of appreciation of the S$NEER policy band. There will be no change to the width of the policy band and the level at which it is centered.

"MAS will continue to closely monitor economic developments and is prepared to recalibrate monetary policy should prospects for inflation and growth weaken significantly," the bank said.

The MAS applies the exchange rate against a basket of currencies within an undisclosed band as its monetary policy tool. The bank will hold its next monetary policy meeting in April.

The question now is whether the MAS will loosen policy further at its next meeting in April 2020, Alex Holmes, an economist at Capital Economics, said.

"While we expect both growth and core inflation to remain subdued, we don't expect the prospects for either to deteriorate significantly," the economist said. The monetary policy is forecast to remain accommodative throughout next year.

The bank expects MAS core inflation to come in at the lower end of the 1-2 percent range in 2019, and average 0.5-1.5 percent next year. At the same time, overall inflation is forecast to be around 0.5 percent in 2019 and average 0.5-1.5 percent in 2020. GDP growth is projected to come in at around the mid-point of the 0-1 percent forecast range in 2019 and improve moderately in 2020. MAS said the projection is subject to considerable uncertainty in the external environment.

Data published by the Ministry of Trade and Industry, earlier in the day, revealed that the city-state economy grew only 0.1 percent in the third quarter, the same rate as seen in the previous quarter.

Nonetheless, avoiding a technical recession, on a quarter-on-quarter seasonally adjusted annualised basis, the economy expanded 0.6 percent, reversing the 2.7 percent contraction in the preceding quarter.