Singapore's MAS leaves monetary policy unchanged

The country's central bank observes of a slower economy that is likely to expand at a moderate pace in the coming quarters. Despite some pickup in labour costs, inflationary pressures are mild and should remain contained.

Singapore Source: Bloomberg

Singapore’s central bank left its monetary policy unchanged on Friday, broadly expected by economists, as it observes of a slower economy that is likely to expand at a moderate pace in the coming quarters.

Due to the slower growth, weaker global oil prices, and a stronger impact from the liberalisation of the retail electricity market, the Monetary Authority of Singapore (MAS) downgraded its forecast range for core Inflation this year to 1–2% from the previous 1.5-2.5%.

Against an expected slowdown in global growth, the central bank forecasts Singapore’s economy to expand by 1.5-3.5% this year.

‘MAS will therefore maintain the current rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band. There will be no change to its width and the level at which it is centred. This policy stance is consistent with a modest and gradual appreciation path of the S$NEER policy band that will ensure medium-term price stability,’ it said.

Singapore’s economic growth to expand ‘at a moderate pace’

In the bi-annual monetary policy statement, the MAS said Singapore’s economic growth has ‘slowed, and is likely to expand at a modest pace in the coming quarters’.

Advance estimates from the Ministry of Trade and Industry showed the country’s first quarter growth at 1.3%, lower than the fourth quarter’s 1.9% increase and economists’ expectations of a 1.5% gain.

The MAS said the contribution from the manufacturing sector has waned over the last six months, reflecting the maturing of the global electronics cycle and the economic slowdown in China.

Meanwhile, activity in the services sectors stayed firm, supported mainly by financial and business services as well as information and communications services, the MAS said. The construction sector has also recovered from a protracted period of weakness.

Despite some pickup in labour costs, inflationary pressures are mild and should remain contained, it added.

Global growth expected to slow

The growth momentum of the global economy has moderated by more-than-expected at the turn of the year alongside sluggish trade, the MAS said, cautioning that ‘significant uncertainty’ remains over the short-term outlook.

However, the central bank noted that policy stances in China and the United States have become more accommodative, while global financial conditions have eased.

‘All in, global growth for 2019 is forecast to slow, following the strong expansions in the last two years,’ it said.


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