Why MAS will stay dovish on monetary policy

Moderating inflation and creeping downside growth risks should convince the central bank to retain or even ease monetary policy, says OCBC.

The Monetary Authority of Singapore tightened monetary policy in April, but now "the odds are clearly tilting towards no further policy tightening at the October MAS meeting, given that inflation also appears to be stabilizing and downside growth risks may be renewing," said OCBC in its Asia Outlook H2 2012 report.

"The weakening growth momentum, both globally and regionally, coupled with easing inflationary pressures, especially given retreating commodity prices like crude oil, have led to central banks sticking to a dovish bias for now. The SGD NEER currently continues to trade on the weaker side of its parity band amid the deterioration in global risk sentiments," OCBC added. "If a technical recession does materialize, expect market speculation of a monetary."