Here are three reasons why the MAS refused to budge in today’s MPS

Global uncertainty is in check at the moment.

The Monetary Authority of Singapore trumped consensus expectations of another easing in its scheduled Monetary Policy Statement (MPS) that was released today.

HSBC noted that today’s decision will clearly be perceived by the markets as hawkish, as some form of easing had been priced in since the unexpected move in January, which engendered speculation of a second move.

HSBC stated that there are three reasons which kept the MAS from tweaking the band, namely lesser global uncertainty, the desire to limit excessive SGD weakness and a lack of real worry over rising interest rates.

“In our view, the MAS did not widen the band for three reasons. First, the MAS does not see significant global or domestic economic uncertainty – in fact, it sees the economy evolving “as envisaged”. Second, the MAS does not want to accommodate more volatility in the SGDNEER. In fact, the hawkish inflation bias could suggest the MAS wants to limit any excessive SGD weakness. Third, the central bank is not necessarily worried about the rise in interest rates, which it views as a normalisation after several years of very low rates,” stated HSBC.