Singapore keeps policy on hold, opens door to 2018 tightening

Monetary Authority

Singapore keeps policy unchanged, says growth could slow in 2018

The Monetary Authority of Singapore (MAS) on Friday (Oct 13) kept its exchange rate-based monetary policy unchanged at its semi-annual review, in line with expectations.

Official data released on Friday showed Singapore's trade-reliant economy grew 6.3 percent in the third quarter from the previous three months on an annualised basis, driven by demand for production of electronics goods and much faster than the median forecast in a Reuters survey of 3.2 percent.

"Notably, MAS referenced that its stance in the October 2016 MPS (Monetary Policy Statement) was that the neutral policy stance would be appropriate for an extended period, and given the economic outlook at this stage and consistent with medium-term price stability, MAS will maintain the rate of appreciation of the S$NEER policy band at zero percent, with the width of the policy band and the level at which it is centred also unchanged".

Third-quarter growth was underpinned by the strong expansion in electronics production, reflecting an enduring upturn in global demand for IT products, MAS said in its policy statement. The MAS maintained this stance for the past two meetings, while reiterating in April the need to maintain its neutral stance for an "extended period".

The MAS applies the exchange rate against a basket of currencies within an undisclosed band as its monetary policy tool.

The MAS said core inflation is projected to come in at around 1.5 percent in 2017 and average 1-2 percent next year, adding that core inflation is expected to average slightly below 2 percent in the medium term.

The Singapore dollar slipped after the MAS policy decision, and was last down 0.2 percent on the day at 1.3543 per US dollar.

Singapore's policy stance tracks similar postures by other central banks in the region, which are increasingly shifting away from closely tracking USA monetary policy.

Although Singapore's trade-reliant economy has gained this year from an improvement in global demand for electronics products and semiconductors, most economists had predicted the MAS would stand pat on Friday, given the lack of strong inflationary pressures.

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