SGD: MAS is likely to keep all the parameters unchanged - Westpac

In view of Frances Cheung, Research Analyst at Westpac, The MAS is likely to keep the slope, band width and centre of the SGD NEER unchanged at its October MPC meeting, as moderate inflation suggests no urgency to act.

Key Quotes

“The MAS does expect inflation to pick up modestly, and sounds positive on Singapore’s growth outlook as well. In this regard, market awaits any change in the forward guidance (“extended period”) in the upcoming MPC statement. A change in the forward guidance will point to the option of tightening at the April 2018 meeting, provided that economic activities and inflation evolve as the MAS expects.”

“If market continues to expect some form of MAS tightening down the road, then the upward pressure on USD/SGD will be mitigated. We expect SGD SOR to rise mainly on our expectation for higher USD rates. However, forward points remain the key swing factor. A hawkish MAS may from time to time put downward pressure on forward points and hence lessen the upward pressure on SGD SOR.”