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§ MAS
will release it bi-annual exchange rate policy decision on 14 Oct. We expect
the MAS to stand pat on policy and maintain its “modest and gradual
appreciation” stance with no change to the slope, width or centre of the band.
§
The balance of risks between
growth and inflation are still finely balanced with growth still vulnerable
and with headline inflation easing. However, core inflation remains sticky at
elevated levels, amid the restructuring of the economy in a tight labour environment,
and could tilt the balance in favour of inflation ahead. Short of a global
tail risk leaing to a decline in domestic output, the ongoing NEER-plus policy
approach (to address both headline and asset price inflation) remains
appropriate.
We therefore do not expect any change in policy
for now. The medium term outlook still sees finely balanced growth and
inflation trade-off; expected tightening in rates via Fed and then SOR &
SIBOR could impact growth, temper inflation and push USD/SGD higher in the
trade weighted index. Any move now could add more volatility in the SGD
market. Also an easing now when the Singapore dollar is near the mid-point
could lead to markets pushing USD/SGD sharply higher, which may not be what
MAS wants in the current environment.
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