MAS Decision Primer: No Change On The Cards, Focus On Fiscal

The MAS' late March meeting saw it "adopt a 0% per annum rate of appreciation of the policy band starting at the prevailing level of the S$NEER. There will be no change to the width of the policy band. This policy decision hence affirms the present level of the S$NEER, as well as the width and 0% appreciation slope of the policy band going forward, thus providing stability to the trade-weighted exchange rate." This represented a double-barrelled brand of easing as it lowered the mid-point & completely flattened the slope of the policy band as COVID-19 gripped the globe.

• The sell side looks for no change in policy at today's meeting, with those willing to attribute a probability to their view pointing to a 70-80% chance of such an outcome. Most estimates that we have seen put the S$NEER at ~0.2-0.6% stronger vs. the midpoint of the MAS' band.
• Looking ahead, the sell side generally doesn't rule out further easing in '21, although there is agreement that the burden of supporting the economy predominantly falls on the fiscal side. Singapore's economy is experiencing a rebound, although structural headwinds persist, and include factors that aren't best suited to management via monetary policy. A strong fiscal impulse has been deployed thus far with 4 packages equating to just shy of 20%/GDP formalised in Feb-May.