SGD NEER likely to be supported in MAS’ MPS - HSBC

The policy is expected to normalize in April 2022. 

Economists believe that the Singapore Dollar Nominal Effective Exchange Rate (SGD NEER) is expected to be supported by the Monetary Authority of Singapore (MAS) with their Monetary Policy Statement (MPS) on 14 October, HSBC reported. 

A slope of 0% for the policy band is expected, with the policy seen to normalise in April 2022. 

Should SGD Neer be affected by MAS’ tightening of its policy, economists see it rising towards its year-to-date high of 1.4% above the midpoint. If MAS stands adamant, however, the SGD NEER can experience a gradual rise within the range of 1-1.5% above mid going forward. 

In HSBC’S model, an average of 0.9% above-mid was registered since the April MPS. 

The research also outlined several ways that MAS could be more hawkish of changes to the MPS.

“First, the core inflation forecast range for 2022 could be higher compared to the 0-1% range for 2021. Second, the edited forward guidance—'MAS assesses that an accommodative policy stance remains appropriate'—may potentially be removed entirely. Third, there is a possibility that the MAS may add a new line on how it will closely monitor inflationary developments, similar to what it did in the October 2009 MPS, before it normalised policy in April 2010.”