Get ready for MAS tightening in April

The central bank has previously kept its neutral stance.

The Monetary Authority of Singapore (MAS) is expected to exit its neutral policy stance (0% per annum slope) for the Singapore dollar nominal effective exchange rate (S$NEER) policy band in the upcoming April policy meeting, as opposed to waiting until October.

However, BofA Merrill Lynch said it sticks to its call that any exit will most likely be gradual, starting with a shift to a modest 0.5% p.a. slope for the policy band in April.

Here's more from BofAML:

Also, we see little direct policy implication for MAS from the FY2018 budget on Monday, even if the authorities decide to increase the GST.

Whilst such an adjustment will have a significant inflationary impact, it will be one-off. On the other hand, MAS' policy stance is calibrated towards achieving price stability objectives in the medium-term.

As such, we expect MAS to look through any temporary increase in inflation but pay more attention to any evidence of second-round effects.