MAS to further steepen S$NEER gradient in April: analysts

This is despite MAS’ surprise-off cycle tightening in January.

Analysts believe that the Monteraty Authority of Singapore (MAS) will further steepen the S$NEER gradient in April, despite already raising the slope “slightly” on 25 January.

Experts from UOB, ING, OCBC, Bank of Singapore, Morgan Stanley, Standard Chartered all said that MAS’ off-cycle move does not rule out the further tightening at the April meeting.

The Bank of Singapore said the further tightening in April will likely take the S$NEER slope closer to the historical 2% to 2.5% appreciation per annum (p.a.).

This was echoed by OCBC, saying that a +2% appreciation path would likely happen if “inflation remains broad-based and persistent than what has been priced in currently.”

“An abrupt re-centring of the mid-point is possible, to deal with more persistent upward inflation pressures but is currently not our base case,” the Bank of Singapore added.

Standard Chartered, for its part, maintained their call for another 50bps steepening of the SGD NEER policy band in April.

Based on estimates from analysts, the appreciation slope likely stands at 1% to 1.5% p.a. after MAS’s off-cycle move.

UOB said MAS’s rare inter-meeting move “will ensure that SGD maintains its relative strength against the currencies of our regional peers.”

“However, the backdrop is also increasingly that of a stronger US Dollar as the US Federal Reserve is on the cusp of a sustained rate hiking cycle,” UOB added.

ADDX, meanwhile, said the move was MAS’s “clear signal to the market that it stands ready to act to bring prices under control.”

OCBC, Morgan Stanley, and ING, shared the sentiment saying the latest tightening could be a “pre-emptive” and “appropriate” move “to snuff out escalating price pressures” and ensure medium-term price stability.