MAS likely to tighten monetary policy anew in October after record-high inflation in May: analysts

Experts expert MAS to steepen the S$NEER gradient to 2%.

Following the record-high core inflation in May of 3.6%, experts believe that the Monetary Authority of Singapore (MAS) will tighten anew its monetary policy in October.

"We expect MAS to further steepen the S$NEER gradient at the Oct 2022 monetary policy meeting, while leaving the width of the band and the level at which it is centred unchanged," said UOB, adding that the slope may be raised to 2%. 

This was echoed by ING, saying that the possibility of additional tightening is likely if prices stay elevated in mid-Q3.

"Energy and food prices could very well stay pricey given current indications as countries resort to protectionist policies at the expense of global supply," ING added.

UOB said that the tightening may also come ahead of October "especially if core inflation accelerates well above 4% in the next few months."

Maybank, on the other hand, thinks MAS will maintain its current appreciation stance of 1.5% because it believes core inflation will peak in the third quarter.

"Commodity prices have been slipping from their recent peaks, including food prices. The relaxation of some export bans on palm oil in Indonesia and fertiliser in Russia will help ease food price pressures. The global growth slowdown and monetary tightening are leading to demand destruction and cooling commodity prices," Maybank commented.

Given the record-high core inflation, UOB and Maybank revised their full-year estimate to 4.0%, exceeding the official forecast range of 2.5% to 3.5%.

READ MORE: Inflation to increase ‘by a bigger magnitude’ in coming months: analysts