Monetary Authority of Singapore Eases Policy

The Monetary Authority of Singapore eased monetary policy settings.  The MAS said: "Given the stresses and fragility in the advanced economies, the prospects for growth in Singapore's major trading partners have deteriorated.  With the slowdown in demand, growth in the Singapore economy could fall below its potential rate of 3-5%.  Thus, core inflation should ease next year, although headline inflation could stay elevated in the near term reflecting the higher imputed rental cost of owner-occupied housing.  MAS will continue with the policy of a modest and gradual appreciation of the S$NEER policy band in the period ahead.  However, given the expected moderation in core inflation, the slope of the policy band will be reduced, with no change to the width of the band and the level at which it is centred."

The Monetary Authority of Singapore moved to tighten monetary policy settings at its previous biannual monetary policy meeting in April, when it said it would "re-centre the exchange rate policy band upwards".  The Singaporean economy contracted -6.5% q/q in the June quarter (27.2% in the March quarter), bringing year on year GDP growth to 0.9% (9.3% in March).  The Ministry of Trade and Industry said Singapore's economy is expected to grow by 5-6% in 2011.

Singapore reported headline inflation of 5.6% in July-August, compared to 4.7% in Q2 2011, while core inflation was 2.2% in Q2.  The MAS said core inflation is likely to ease from an estimated 2.3% in Q4 to 1.5% by the end of 2012.  The Singapore Dollar (SGD) has gained about 1% against the US dollar so far this year, while the USDSGD exchange rate last traded around 1.27.

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