UOB Look For A Slight Gradient Steepening In SGD NEER

UOB expect the MAS to “further steepen the SGD NEER gradient “slightly”. This is estimated to bring the policy band gradient to an appreciation of 1.5%, from the current 1.0%. We note that there is also a material risk for additional tightening via a recentring of the policy mid-point higher to accommodate a stronger S$NEER basket. This is due to the relative strength in the SGD NEER at the time of writing (8 Apr), where the NEER is hovering at 1.7% above the mid-point and appears to be testing its top-bound of the 2.0% band. This suggests that there is little headroom for the SGD NEER to appreciate further, and a recentring would be able to provide further room to accommodate further SGD NEER strength as part of the policy tool to manage inflationary risks.”