To ease or not to ease: What will the April Monetary Policy Statement bring?

The MPS will be released on April 14.

The Monetary Authority of Singapore will release its Monetary Policy Statement on April 14, the central bank stated in its website today.

The April MPS will be released at 8:00 am and will follow an unscheduled policy easing released in late January.

As the date draws closer, analysts are becoming increasingly divided on the central bank's likely course. The MAS has three options: it could either either stand pat, widen the band, or lower the band once more.

OCBC analyst Emmanuel Ng believes that the MAS will keep its policy unchanged, as global growth and inflation prospects have not further deteriorated precipitously since January.

“We are of the view that the SGD NEER is sufficiently reflective of the underlying macroeconomic conditions confronting the economy. Overall, our base case is for MAS to stand pat at the April MPS, maintaining the relative level at which the parity is centered, the gradient of the policy band, and the width of the fluctuation band. We attach a 60% probability to this scenario,” Ng wrote.

Meanwhile, DBS analyst Philip Wee believes that the SGD NEER policy bands will be shifted lower when the central bank meets later this month.

“Given the economy's unusual mix of low growth, no inflation and a tight labor market, this seems the most sensible option. A lower band would also allow the central bank to better manage the volatility arising from further strength in the USD expected later this year,” Wee noted.

Instead of lowering the band, Credit Suisse analyst Michael Wan notes that the MAS is more likely to widen the band, which will provide insurance in case economic activity dips further in the near term.

“We now see band widening as the most likely policy action come April rather than the downward re-centering that many analysts expect. The Monetary Authority of Singapore's (MAS) assessment of growth outlook probably has not changed drastically enough since January to justify more significant easing, in our view. Despite a likely weak 1Q GDP, expected fiscal stimulus and stronger global growth uptick should enable the government to achieve its full-year growth forecast of 2% to 4%. A downward re-centering may also send too strong a signal that the authority has turned materially more dovish, which we doubt is the case,” Wan noted.

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