MAS likely to ease policy in October to fire up Singapore’s slowing economy: report

Poor export performance will spur action.

The Monetary Authority of Singapore (MAS) is likely to ease its SGD policy at its upcoming bi-annual meeting in October.

According to BMI Research, the MAS will be pushed into action by the confluence of continued deflation, a weak export performance, real effective appreciation in the Singapore dollar, and a downgrade to the MAS's real GDP growth forecast.

“We believe that the MAS is increasingly likely to ease policy at its October meeting in order to address the slowing economy. The decision rests on a knife's edge, as the MAS has repeatedly indicated ambiguity regarding the ongoing trend of deflation,” the report said.

“The SGD has actually strengthened in real effective terms over the past two quarters, despite having sold off versus the US dollar over the same period. Coupled with the poor performance of the export sector, along with a downgrade to the MAS's full year real GDP growth forecast range of 2.0-4.0%, we see a moderate likelihood that the central bank will either decrease the SGD's appreciatory slope or re-centre the currency's band lower against its trade-weighted basket,” BMI Research added.

Singapore’s economy grew 1.8% in the second quarter, while full-year growth forecasts have been trimmed from 2%-4% to just 2%-2.5%.