MAS seen easing further in April on slowing growth, inflation: Reuters poll

The Monetary Authority of Singapore is likely to ease monetary policy further in April as lower-than-expected inflation and output data suggest the economy is slowing and facing growing deflationary pressures, a Reuters poll showed. -- ST PHOTO:
The Monetary Authority of Singapore is likely to ease monetary policy further in April as lower-than-expected inflation and output data suggest the economy is slowing and facing growing deflationary pressures, a Reuters poll showed. -- ST PHOTO: DANIEL NEO

SINGAPORE (Reuters) - Singapore's central bank is likely to ease monetary policy further in April as lower-than-expected inflation and output data suggest the economy is slowing and facing growing deflationary pressures, a Reuters poll showed.

Seven out of 11 economists and currency analysts surveyed expected the Monetary Authority of Singapore to re-centre its band for the Singapore dollar's exchange rate level, or widen the band in its regular bi-annual meeting next month.

The central bank manages monetary policy by letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed trading band based on its nominal effective exchange rate.

"We now expect the Monetary Authority of Singapore (MAS) to further ease policy at its mid-April meeting, given weaker growth prospects and lower inflation risks," said Chua Hak Bin, an economist at Bank of America Merrill Lynch, in a research note. "The MAS will likely re-centre the band lower to the prevailing level of the S$NEER (nominal effective exchange rate)," he said.

On Jan. 28, the MAS unexpectedly eased monetary policy by reducing the slope of its policy band in an unscheduled meeting.

The Singapore dollar on Monday slid to 1.3657 per the US dollar, its weakest since August 2010, after China's central bank cut interest rates on Saturday, underscoring expectations of further easing across Asia.

The Sing dollar lost 0.6 per cent in February, its eighth consecutive monthly depreciation, Thomson Reuters data showed. The data goes back as far as 1981 and it is the longest losing streak since then.

So far this year, it has depreciated 2.8 per cent against the U.S. dollar.

MISS Industrial production in January rose 0.9 per cent from a year earlier, data showed on Thursday, far below a forecast of a 3.7 per cent expansion in a Reuters poll.

The disappointing number came even as the Lunar New Year holidays fell in January last year. The holidays were in February in 2015.

The consumer price index fell 0.4 per cent last month from a year earlier, the largest drop since December 2009, separate data showed.

Still, some economists said it would be premature to predict more stimulus as the economy is not facing recession risks, some economists said.

The government has also taken an expansionary fiscal stance, while inflation could pick up later this year, they added.

Singapore is expected to post a budget deficit of $6.7 billion in the 2015-16 fiscal year with spending up, Finance Minister Tharman Sharmugaratnam said when the government unveiled a budget last week.

"We continue to see a relatively low likelihood of further easing at the next policy review by the Monetary Authority of Singapore in April," economists at Nomura said.