Monetary policy still appropriate despite downside growth risks: MAS

The central bank is in a wait-and-see mode.

Singapore’s central bank affirmed Wednesday that its monetary policy remains appropriate, after the local economy posted an unexpected 1.9% year-on-year growth in Q3.

According to a report by OCBC, the Monetary Authority of Singapore (MAS) indicated that monetary policy will be unchanged as downside growth risks are well within MAS parameters.

“Like most of the other Asian central banks in wait-and-see mode, the inclination is that whilst the growth outlook is slightly dovish, the inflation view is still slightly cautious in that the base effects of the oil price slump in 4Q14 will fade into 2016,” said OCBC.

The MAS had based its October monetary policy statement on official advance estimates of a measly 0.1% growth for the third quarter.

In October, the central bank said that it will continue with the policy of a modest and gradual appreciation of the S$NEER policy band, but the rate of appreciation will be reduced slightly. 

The central bank expects its core inflation will stay subdued in 2015, but should pick up gradually over 2016, largely due to the dissipation of the disinflationary effects of lower oil prices, and budgetary and other one-off measures.