In an effort to address the recent market activities in the SGD Swap Offer Rate (SOR), a spokesperson from the Monetary Authority of Singapore (MAS) reaffirmed that interest rates in the country are market-influenced and declared the existing monetary policy position, announced in April, appropriate.
“Singapore’s monetary policy framework is based on managing the trade-weighted exchange rate. This means that, given the economy’s openness to capital flows, domestic interest rates are strongly influenced by global liquidity conditions. SGD interest rates have been low for some time due to historically low global interest rates.”
“The major economies are keeping monetary policy loose for a sustained period in the face of a weak recovery from the 2008-09 recessions. The US Federal Reserve for example has recently pledged to keep its policy rate close to zero percent until mid-2013.”
The MAS spokesperson noted that recent developments in global financial markets have pushed some investors to opt for safer short-term cash deposits prevalent in the forward markets.
“SOR is a derived rate for borrowing SGD in the forward market through a foreign exchange swap transaction. It has turned negative, reflecting market expectations of the exchange rate.”
“Singapore’s domestic money markets continue to function in an orderly manner and MAS has had no need to undertake any extraordinary measures.”
As such, the authority will maintain its monetary policy published in the April 2011 Monetary Policy Statement (MPS) and reiterated in the MAS Annual Report Press Conference on 21 July 2011.
To contact the journalist, you may send your message to editor@propertyguru.com.sg