MAS keeps monetary policy unchanged amid low inflation, moderate growth

There will be no change to the policy band.

The Monetary Authority of Singapore (MAS) today ended months of speculation with the release of its semi-annual Monetary Policy Statement (MPS).

The MAS will keep its policy of a modest and gradual appreciation of the S$NEER policy band unchanged, as the economy “is evolving as envisaged in the January MPS”.

“MAS will therefore maintain the policy of a modest and gradual appreciation of the S$NEER policy band. There will be no change to the slope and width of the policy band, and the level at which it is centred. This policy stance is consistent with the benign inflation outlook and moderate growth prospects for the whole of 2015, and appropriate for ensuring medium-term price stability in the economy,” the MAS stated.

Today’s MPS trumped analyst expectations that the MAS will either widen or re-centre the band.

In a report released prior to the MPS, OCBC analyst Emmanuel Ng stated that the MAS is likely to stand pat as global growth and inflation prospects have not further deteriorated precipitously.

“We are of the view that the SGD NEER is sufficiently reflective of the underlying macroeconomic conditions confronting the economy,” Ng wrote.  

Bank of America Merrill Lynch analysts Claudio Piron and Rohit Garg noted that keeping the policy unchanged will strengthen the SGD in the short-term.

"We expect a relief rally in SGD NEER and SGD as imminent easing expectations are unwound. However, the
impact on rates is a bit unclear as forward points would still remain elevated while short-term easing expectations are unwound," they stated.