Barclays Have Varying Degrees Of Conviction On MAS Tightening Moves

Barclays note that their base case is for “the MAS to tighten on 14 April with an adjustment of all three parameters of the policy band - its slope, width and centre - though we acknowledge varying degrees of confidence around each potential move.”

• “We believe, with a relatively high degree of confidence, that the slope will be raised in April. Our base case is for a 100bp increase to an estimated 2.0% from 1.0% currently, though we note the risk of a larger 200bp increase to 3%. If the slope is raised by 100bp to 2% in April, our base case would be for another 100bp increase to 3% in October.”
• “We expect the band to be widened by 100bp to +/-3% from an estimated +/-2%. We note the risk that the government may choose to keep the width of the band unchanged if it views the economic uncertainty arising from the war between Russia and Ukraine as having moderated.”
• “Our base case remains for the band to also be re-centred up to the “prevailing level” of the SGD NEER when the policy decision is announced. The SGD NEER has averaged around 180bp above the current midpoint over the past week - but we expect the SGD NEER to remain around 100-200bp above the current midpoint. We note that risk of a delay to the recentring is relatively high, possibly to October or even earlier in an “inter-meeting” move, especially if global commodity prices moderate or policymakers remain jittery over the negative effect on growth from the Russia-Ukraine war.”