On Monday, the Central Bank of Singapore has eased monetary policy for the first time in three years, as widely expected, with the nation’s bellwether economy closely evading recessions.
Singapore is due to hold an election within months, has been hit hard by the rising trade war between the United States and China as well as a broader global slowdown, like other trade-reliant Asian Economies.
The MAS (Monetary Authority of Singapore) has managed policy through the exchange rate setting, rather than through interest rates as other central banks do, allowing the Singapore dollar to rise or fall against the currencies of its main trading partners within a hidden policy band.
The MAS has said that it would “reduce slightly” the slope of the policy band on the Singapore dollar, using words that suggest a shallower easing than some had awaited. The level and width at which the band was centered remained unaltered.
The Singapore dollar (SGD) slightly rose against the US dollar on the day.
Barclays Economist Brian Tan was quoted saying, “its a slight reduction in the rate of appreciation. They did not say the policy was neutral so it suggests that the slope is still positive.”
Eleven Economists surveyed by sources had all expected Singapore to ease its first such move since April 2016.
The country’s economy has grown less than expected in the third quarter but avoided fall into a technical recession, reads its flash data.
In 2018, the MAS has twice increased the slope on the policy band, in its efforts to control the pressure of rising price and strengthen its currency, in its first such reinforcing moves in six years.
However, a prolonged tariff dispute between China and the United States of America, which is the two biggest export markets of Singapore, has interrupted global supply chains in trade-reliant economies.
The manufacturing unit has been hit hard, buffeted by trade tensions and a cyclical fall in the electronics sector.
The Government of Singapore is likely to roll out a generous budget in 2020 as polls loom and the ruling party seeks to reconcile voters who are feeling the tweak from the economic downturn.
The MAS further expects full-year growth to come in the mid-point of its 0-1 percent forecast range, and to “improve modestly” in 2020. However, economists considered room for further easing next year.
The Continuum Economics Chief Economist for Asia, Jeff Ng has said that “they (MAS) decided to be gradual instead of pre-emptive.”
“If the trend of slower growth continues in 2020, it may still well be that they continue to ease into 2020,” he added.