MAS takes markets by surprise with unexpected easing move

The rate of appreciation has been set to zero.

The Monetary Authority of Singapore (MAS) defied consensus expectations by deciding to ease monetary policy in its latest policy statement.

The MAS moved to a neutral policy stance by setting the rate of appreciation of the S$NEER policy band at zero percent. The width of the policy band and the level at which it is centred will be unchanged.

Most market watchers had expected the MAS to keep its policy unchanged, particularly because an easing is only expected if the economy enters a recession.

The central bank said that the Singapore economy is projected to expand at a more modest pace this year, and noted that inflation will remain muted in coming quarters.

"This move to a neutral policy stance of zero percent appreciation follows the measured steps that MAS has taken to reduce the rate of appreciation of the policy band in January and October 2015 respectively. The actual outcome of S$NEER movements over the six months since October 2015 has in fact been a zero percent appreciation compared to the preceding six-month period. The cumulative effects of past S$NEER movements and the new policy path will continue to ensure price stability over the medium term," the MAS said.