Singapore’s central bank is poised to ease monetary policy for the second time in 2015 in an effort to revive dwindling growth, economists predict.
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“The MAS statement makes clear why it did not take the more aggressive step of moving to a neutral slope or recentring the policy band to allow a one-off depreciation, which a number of analysts had expected”.
Manufacturing was weak, partly reflecting the slowdown in China’s economy, while services grew. The sector is already in recession, having contracted in the past four quarters in year-on-year terms and in three out of the past five quarters on a sequential basis.
Following the smaller-than-forecast action by the bank and the unexpected expansion of the economy, the Singapore dollar rose by as much as 0.6% against the USA dollar. However, the rate of appreciation will be reduced slightly.
The Monetary Authority of Singapore (MAS) tweaked the policy settings at its semi-annual meeting today, reducing the rate of appreciation of the Singaporean dollar $NEER band.
“The MAS has to acknowledge the fact that things have panned out worse than they expected, both in terms of growth, led by external factors, and inflation domestically”, saidNizam Idris, head of currencies and fixed-income strategy at Macquarie Bank Ltd.in Singapore.
Singapore’s dollar will decline to S$1.44 to the US currency by year-end, according to the median estimate of a separate Bloomberg survey.
The Ministry of Trade and Industry said Wednesday that gross domestic product expanded 0.1 percent in the July-September quarter from the previous quarter.
“Singapore narrowly averted a technical recession with third quarter GDP showing a marginal gain due to positive quarterly growth in services, which offset contraction in manufacturing and construction”, said Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight. “There will be no change to the width of the policy band and the level at which it is centred”, the central bank said in its scheduled October Monetary Policy Statement.
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The Aussie fell 0.4 percent to 72.16 USA cents after Westpac Banking Corp. said it will increase its variable home-loan rates from November. 20, as it announced capital raising on Wednesday in Sydney. It is unsurprisingly, given that global growth remains soft. “It’s a little bit underwhelming, but it’s not disastrous yet”.
