Will Singapore ease monetary policy amidst Q2 surprise GDP slip?

An analyst believes the policy easing will come amidst shrinking growth and slowing inflation.

Bloomberg reported that Singapore’s surprise decrease in gross domestic product (GDP) by 3.4% has spurred speculations of a brewing monetary policy easing, which may result in higher interest rates and bond yields. The trade-reliant island state saw exports slump 17.3% in June amidst the escalating US-China trade wars.

The figures pushed a jump in the three-month swap-offer rate, one of the nation’s benchmark interest rates that reflects the cost of borrowing in Singapore dollars. The gauge rose for four days after the GDP data, even as borrowing costs in the rest of the world fell.

“We are now looking for the MAS to ease policy in October” due to deteriorating growth and slowing inflation, said Irene Cheung, a senior Asia strategist at ANZ Banking Group in Singapore. “Given easing in currency policy, Singapore rates will likely be supported even though lower US rates will exert downward pressure.”

Meanwhile, ING economist Prakash Sakpal said in a research note that they expect easing either in July or in August. “Talk of an off-cycle policy adjustment, before the next scheduled semi-annual review in October, has gained traction.”

Here’s more from Bloomberg.