Singapore : Singapore is likely to raise interest rates again this month, which would be the fifth time in a row. This is because of persistent inflation in the Asian financial hub, which is caused by problems in the global supply chain and a tight job market.
All 16 economists polled by Reuters expect the Monetary Authority of Singapore (MAS) to tighten its policy, but they disagree on how aggressive the central bank is likely to be and which of its settings it will change.
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Instead of using interest rates to set policy, the MAS lets the local dollar rise or fall against the currencies of its main trading partners within a range that is not made public. This range is called the Singapore dollar Nominal Effective Exchange Rate, or S$NEER.
It changes its policy by changing the slope, the middle point, and the width of the policy band.
Economists aren’t sure if MAS will tighten one of its three settings or two of them.
Most of the people who only bet on one lever said that the weak economic outlook was the reason.
Four analysts think that the MAS will raise the midpoint without changing the width or slope, while five others think that the MAS will only change the slope.
Most of the time, changing the midpoint is seen as a more “aggressive” tool than changing the slope, while the width is usually used to limit the volatility of the Singapore dollar.
In a report, Morgan Stanley (NYSE: MS) analysts said, “Recentering the midpoint helps to deal with short-term macro pressures more quickly, while steepening the S$NEER slope has historically been linked to a brighter macro outlook.”
“Singapore’s small, open economy and high reliance on exports make it the most vulnerable in Asia to a slowdown in global demand,” they said. “As we move toward 2023, the balance of concern is likely to shift from upside risks to inflation to downside risks to growth.”
The other seven analysts think that MAS will both make the slope steeper and move the midpoint up.
“The MAS faces a worse growth-inflation tradeoff in October than it did in July when it moved the SNEER policy band up in an off-cycle move,” said Mohamed Faiz Nagutha, an economist at Bank of America (NYSE:BAC) Securities.
The next semi-annual monetary policy statement from the central bank is expected to come out no later than Oct. 14.
The Monetary Authority of Singapore (MAS) has tightened monetary policy four times in a row, with the most recent move happening in July.
Core consumer inflation hit a near 14-year high in August because the prices of services and food went up more than expected. Headline prices also went up more than analysts thought they would.
The MAS thinks that core inflation will be between 3% and 4% this year, and that overall inflation will be between 5% and 6%. Analysts think that the MAS will raise its forecast for inflation at its meeting in October.
The government had thought that the GDP would grow by 3-4% in 2022.
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Most of Singapore’s COVID-19 restrictions have been lifted, and big international conferences and events have been coming back to the city-state in recent months.
