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SINGAPORE: MAS Seen On Hold On Monday

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The MAS is expected to remain on hold at Monday's policy meeting. The local inflation backdrop has seen further improvement in headline momentum, which is now down to 2.2%y/y, the softest pace since the first part of 2021. Still, the core measure has proven to be stickier.  It sits at 2.7%y/y, which is comfortably off early 2023 cycle highs at 5.5%, but the slowdown process has been drawn out. Since the core measure hit 3.0%y/y in Sep last year further downside momentum has proven to be modest. 

  • Up until the end of Sep the SGD NEER y/y change was running at 1.8% , so below both the headline and the core inflation measures in y/y terms. Hence an MAS easing now might jeopardize the efforts to bring core inflation sustainably under control.
  • In terms of the growth backdrop, there are meaningful uncertainties surrounding the outlook, but external demand appears to be holding up ok at this stage. Recent export growth has been in the double digit pace. Data out at the same time as the MAS decision on Monday, Q3 GDP, is predicted to show +2.0% q/q growth (versus +0.4% in Q2).
  • Only a few sell-side economists see an easing chance at this meeting, with most penciling in 2025 for when the MAS will reduced its tightening bias.
  • Market pricing, in terms of the SGD NEER deviation from the top-end of the trading band, also isn't suggesting an easing shift on Monday. Per Goldman Sachs estimates, we still sit close to top-end end of the trading band (see the chart below). We would expect lower NEER levels if easing risks were viewed as stronger by the market.

Fig 1: SGD NEER Deviation From Top End Of The Policy Band - Goldman Sachs 

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The MAS is expected to remain on hold at Monday's policy meeting. The local inflation backdrop has seen further improvement in headline momentum, which is now down to 2.2%y/y, the softest pace since the first part of 2021. Still, the core measure has proven to be stickier.  It sits at 2.7%y/y, which is comfortably off early 2023 cycle highs at 5.5%, but the slowdown process has been drawn out. Since the core measure hit 3.0%y/y in Sep last year further downside momentum has proven to be modest. 

  • Up until the end of Sep the SGD NEER y/y change was running at 1.8% , so below both the headline and the core inflation measures in y/y terms. Hence an MAS easing now might jeopardize the efforts to bring core inflation sustainably under control.
  • In terms of the growth backdrop, there are meaningful uncertainties surrounding the outlook, but external demand appears to be holding up ok at this stage. Recent export growth has been in the double digit pace. Data out at the same time as the MAS decision on Monday, Q3 GDP, is predicted to show +2.0% q/q growth (versus +0.4% in Q2).
  • Only a few sell-side economists see an easing chance at this meeting, with most penciling in 2025 for when the MAS will reduced its tightening bias.
  • Market pricing, in terms of the SGD NEER deviation from the top-end of the trading band, also isn't suggesting an easing shift on Monday. Per Goldman Sachs estimates, we still sit close to top-end end of the trading band (see the chart below). We would expect lower NEER levels if easing risks were viewed as stronger by the market.

Fig 1: SGD NEER Deviation From Top End Of The Policy Band - Goldman Sachs 

Keep reading...Show less