A monetary policy easing is not yet off the table: report

Policymakers need to counter slowing growth.

Most investors do not expect the Monetary Authority of Singapore (MAS) to ease in its upcoming April policy meeting, but a report by Citi cautioned that easing risks may be higher than market expectations as Singapore grapples with slowing growth.

Citi noted that Singapore’s economic outlook has unambiguously deteriorated in past months, with experts trimming their overall growth forecasts in March on back of weak external demand and slowing domestic consumption.

“We sense MAS see monetary policy is already accommodative, and that some of last year's fiscal stimulus may continue to filter into this year. The MAS policy is focused mainly on core inflation and not meant to gain competitiveness, as income effects outweigh price effects for exports, whilst for most companies, domestic costs, rather than a strong SGD, are the main concern. However a slower rate of appreciation is still an appropriate cyclical response to the slowdown,” said the report.

“As we place a greater weight on the unambiguous downshift in the outlook, and constraints from the Balanced Budget Rule, we sense the risk of easing may be higher than markets expect, even if only for signaling purposes,” Citi noted.