3 reasons why neutral monetary policy is here to stay

GDP growth was revised higher, but still within the 1-3% forecast.

There are apparently three reasons why analysts think that the Monetary Authority of Singapore will be maintaining its neutral monetary policy stance come April this year.

As the SGD nominal effective exchange rate slope is 0% currently, analysts from Standard Chartered said one of the reasons is that for starters, MAS provided rare guidance in the October 2016 monetary policy statement that it would keep a neutral policy stance for an extended period.More so, the analysts noted that Singapore's GDP growth was revised higher for the past year to 2.9%, well within the government's initial forecast of 1-3%.

"The government is maintaining its modest outlook for the economy in 2017, at 1-3% growth, and is wary of downside risks," Standard Chartered analysts explained.

The last reason they cited is the forecast for Singapore's core inflation, which would likely to remain within the MAS' forecast of 1-2%, with a softer labour market mitigating the upside risk.

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