MAS’ band widening is still unlikely: Standard Chartered

But risks such as inflation globally cannot be ruled out.

As the Monetary of Singapore (MAS) holds its monetary policy meeting on 14 April, Standard Chartered, a financial services company, sees that policy band widening is still unlikely amidst inflation risks.

Responding to investors’ queries, Standard Chartered’s statement stemmed from historical data where MAS only widened its policy band twice in the past two decades, in October 2010 and October 2001.

MAS previously said that it widens its policy band when there is a short-term rise in Singapore dollar nominal effective exchange rate (SGD NEER) volatility.

In its estimates, Standard Chartered said the SGD NEER realised volatility remained close to its historical lows for the past year. But SGD NEER traded exceptionally close to the strong end of the band for an extended period and uncertainty in the external environment has increased.

With these factors, Standard Chartered projected that band widening is unlikely but external risks cannot be ruled out.

It noted that band widening could result in de-facto tightening as it will likely lead to SGD NEER appreciating. But, with the upside risks to inflation, MAS may choose re-centering instead of band widening.