Brace for another intra-meeting policy surprise after today’s dull MPS: analysts

It could spur interest rates to further highs.

Following today’s “very dull” monetary policy statement, analysts note that there is greater likelihood that the Monetary Authority of Singapore (MAS) will again surprise the market with an unscheduled easing should global volatility escalate.

According to OCBC analyst Selena Ling, the surprise monetary easing in late January suggests there are no self-imposed constraints on moving only at the scheduled April and October policy meetings. 

“As such, the window for another pre-emptive move later this year is not fully closed in the event of a structural shift in the growth-inflation dynamics and/or the risk of a resurgent USD strengthening,” she wrote.

Meanwhile, BNP Paribas noted that today’s MPS was surprising because it made no reference to global volatility in financial markets.

“By not accounting for the potential pick-up in volatility, the MAS retains the option to surprise the market with another intra-meeting move. While unlikely to cause lasting damage to policy credibility, given the structural shift in Singapore’s financial system it risks unnecessarily spurring domestic interest rates to further highs, and in turn, inflicting greater cashflow strain on Singapore’s highly indebted households that creates greater problems for MAS in the future,” BNP Paribas noted.