Another unscheduled monetary policy easing move is off the table: HSBC

Conditions have to be extreme for another easing.

The Monetary Authority of Singapore (MAS) is unlikely to surprise markets with another off-cycle easing move before its scheduled policy meeting in April, according to a report by HSBC.

The MAS caught analysts off-guard when it suddenly eased policy at an inter-meeting move in January last year, the first time it had done an unscheduled easing since October 2001.

Now, HSBC says that the MAS will keep policy on hold although some analysts have pointed out that there are certain similarities in the global backdrop today with that of a year ago.

“The bar for further monetary policy easing is quite high, since the next move will involve a flattening of the slope and/or a downward re-centering of the band - and these policy settings typically require recessionary conditions, unemployment and persistently negative core price inflation prints, which are not yet present,” said the report.

Another weighty variable is the US Fed’s rate hike in December and expected further policy tightening this year.

“SGD forward points and FX implied interest rates have risen sharply over the past year, amid MAS policy easing and SGD depreciation. That will, in turn, put pressure on the highly leveraged Singapore economy and likely deepen the soft landing of the housing market. In our view, the MAS may have decreased the slope of the band by a magnitude - 0.5% point - smaller than usual in October 2015, out of this consideration,” HSBC said.