MAS ‘increasingly likely’ to ease again in 2016 as SGD weakens

It has plenty of room to act thanks to deflation.

The Monetary Authority of Singapore will keep its hand on the policy easing lever in 2016, analysts say, as the Singapore dollar continues to battle broad-based depreciatory pressures.

A report by BMI Research highlighted that there is a chance that the MAS will take the currency’s appreciatory slope to neutral, from its current slightly appreciatory bias.

“We also believe that the SGD continues to face broad-based depreciatory pressures that will see it lower over the coming quarters. Technically, the unit is showing continued weakness, having consistently failed to break out of its approximately 3 year long depreciatory trend,” said BMI.

Meanwhile, analysts at Bank of America Merrill Lynch believe that the MAS will maintain its monetary policy in 2016. However, they note that persistent deflation gives the central bank plenty of room to act if growth deteriorates.

“Subdued inflation is leaving the MAS plenty of room to ease further in 2016, if necessary. Our base case is for the MAS to maintain its current ‘mild’ modest and gradual S$NEER appreciation stance in 2016, in the face of Federal Reserve rate hikes and other external uncertainties, unless growth deteriorates sharply,” BofAML said.