OCBC’s Sim Moh Siong and Christopher Wong expect the Monetary Authority of Singapore (MAS) to leave the Singapore dollar (SGD) nominal effective exchange rate (S$NEER) policy unchanged at Monday’s meeting despite a moderate rebound in the core consumer price index (CPI) to 1.6% year-on-year in June. They argue that the move does not yet signal a broad or sustained inflationary impulse and argue that sustainable maintenance should limit the SGD response, although pressure on imported inflation could keep S$NEER unchanged.
Stop the politics, but pay attention to the tone
“Our base case scenario for the upcoming MAS MPS is likely to hold at Monday’s meeting.”
“The modest rebound warrants some caution, but does not yet suggest the broad or sustained inflationary momentum needed to justify another tightening of monetary policy so soon after April.”
“The halt in emissions should therefore be seen as a need for MAS to spend more time assessing the delayed costs of importing and shifting energy, rather than signaling a complete explanation for inflation.”
“Sustainable maintenance should result in a limited SGD response, while greater emphasis on delayed imported inflation or renewed domestic price pressures could keep S$NEER unchanged.”
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