Singapore keeps policy on hold, opens door to 2018 tightening

Accenture Develops DLT Prototypes for Singapore's Central Bank                          Oct 12 2017 at 12:00 UTC by Stan Higgins

Accenture Develops DLT Prototypes for Singapore's Central Bank Oct 12 2017 at 12:00 UTC by Stan Higgins

The Monetary Authority of Singapore (MAS) kept the monetary policy unchanged on Friday, but left room to tighten in future because of stronger economic growth.

Prior to Friday's policy meeting, most economists had expected MAS to stay the course on its monetary policy stance but there were some who thought the central bank could tweak its dovish "extended period" forward guidance.

The Monetary Authority of Singapore said it will maintain the rate of appreciation of the S$NEER policy band at zero percent.

The width of the policy band and the level at which it is centred will be unchanged, it added.

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According to the advance estimates released by the Ministry of Trade and Industry, the Singapore economy grew by 6.3 percent on a quarter-on-quarter seasonally-adjusted annualised basis in the third-quarter, following the 2.4 percent recorded in the second-quarter.

"For this reason, we are leaving our base case view unchanged at this stage for no change from the MAS in April next year as well".

"MAS had indicated in the October 2016 (monetary policy statement) that the neutral policy stance would be appropriate for an extended period".

Core inflation - a major policy consideration for the MAS - is expected to be broadly stable throughout next year though it could trend upwards to average slightly below 2 per cent over the medium term, MAS said.

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The Singapore dollar slipped after the MAS policy decision, and was last down 0.1 per cent on the day at 1.3540 per U.S. dollar.

The MAS manages monetary policy through exchange rate settings, rather than interest rates, letting the Singapore dollar rise or fall against the currencies of its main trading partners within in an undisclosed policy band.

"The central bank has also highlighted that growth momentum in 2018 would be slightly slower than this year, which is in line with our expectation, while inflation will remain benign at between zero and one per cent".

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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