SGD: MAS Preview - Westpac
Sean Callow, Research Analyst at Westpac, suggests that the MAS
semi-annual policy announcement will be delivered Thursday, along with
Singapore's advance Q1 GDP.
Key Quotes
“The
Monetary Authority of Singapore’s semi-annual policy review is set for
8am local time (10am AEST) on Thu 14 April, at the same time as the
advance reading on Q1 GDP. In October, the MAS noted a slightly weaker
than expected growth profile but little change in its core inflation
view. As a result, they “reduced slightly” the pace of appreciation of
the SGD nominal effective exchange rate (NEER) policy band, though still
described this pace as “modest and gradual.”
This very gentle
appreciation pace is a clear barrier to further monetary easing at this
meeting. Q1 GDP is likely to be flat or slightly negative, but this will
be seen in the context of the headline 6.2% SAAR burst of growth in Q4
(i.e. 1.5% q/q).
So a broadly stable growth outlook argues for
no change in already accommodative monetary policy. Inflation meanwhile
shows the familiar global divergence between headline/total inflation
and core CPI. Singapore Feb CPI printed at -0.8% y/y, weighed by housing
& utilities (-4.1%) and of course transport, -2.9%. But the MAS
core measure excludes the accommodation and private road transport
components; it rose 0.5% y/y. MAS and MTI said core inflation is
expected to rise gradually over 2016, to average 0.5-1.5% y/y. Wages
growth is seen as supportive but global factors should cap the rise.
This
all points to one of the less eagerly anticipated MAS reviews in some
time. SGD “modest and gradual appreciation” should be maintained for the
next 6 months. Having passed on the option last Oct to widen the band
ahead of the anxiously anticipated first post-GFC Fed rate hike, the
width should be kept at +/-2%. As our chart shows, on our estimates, SGD
NEER is currently comfortably placed well inside the policy band.
USD/SGD
should show little response to a steady hand from the MAS on the day.
But multi-month, we see risks on the pair tilted firmly to the upside,
given our call for 2 more increases in the Fed funds rate before
year-end. A "modest" SGD annual appreciation would not preclude USD/SGD
grinding back to the 1.42-1.44 area during H2 2016.”
(Market News Provided by FXstreet)
