MAS easing more likely next month after surprisingly weak IP print

The SGD NEER will be re-centered.

February’s surprisingly weak Industrial Production (IP) print is likely to lead to another policy easing by the Monetary Authority of Singapore (MAS).

Data released by the Department of Statistics yesterday showed that February IP declined 3.6% year-on-year, below consensus estimates of a 2.2% contraction.

A report by UOB highlighted that this IP release will be the last data-point before the MAS makes its decision in its April policy meeting.

“We think that the weakness, coupled with the SGD NEER trading quite close to the -2% band recently, will see the MAS adopting a downward re-centering of the SGD NEER midpoint by around 2% in their April decision. We continue to see the USD/SGD trending higher to the 1.44 mark by end-2015,” UOB noted.

A report by Bank of America Merrill Lynch also stated that the MAS is likely to re-center the exchange rate policy band lower to the prevailing level of the S$NEER.

“We see the Monetary Authority of Singapore (MAS) further easing policy at its mid-April meeting, by re-centering the exchange rate policy band lower to the prevailing level of the S$NEER. Today's weak IP reading suggests downside risks to growth, and reinforces our expectation. We see downside risks to our full year 2015 growth forecast of 2.8%, and believe there is a high likelihood that the government will have to reduce its GDP growth forecast to 1%-3% before mid-year, from the current 2%-4%,” stated BofAML.