The Monetary Authority of Singapore (MAS) on Wednesday (14 October) announced that it reduce the pace of the Singapore dollar appreciation for the second time this year, in an effort to revive dwindling economic growth that narrowly avoided a technical recession.
The central bank, which manages the economy through guiding the currency instead of setting interest rates, said “it will continue with the policy of a modest and gradual appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band,” but will slightly reduce the rate of its appreciation.
“There will be no change to its slope, width and the level at which it [S$NEER] was centred,” it said.
MAS guides the local currency against an undisclosed basket and adjusts its appreciation or depreciation pace by changing the slope, width and center of a band. It, however, does not disclose details of the basket, the band, and the pace of appreciation or depreciation.
“This policy stance was assessed to be appropriate in view of the moderate growth and inflation prospects,” it added.
MAS adjusted its monetary policy in an unscheduled meeting in January, and left it unchanged in the first of two scheduled meetings this year in April.
“Following the Monetary Policy Statement (MPS) in April, the S$NEER appreciated amid a broad-based retraction in US$ strength. Since July, however, the S$NEER has weakened and largely fluctuated in the lower half of the policy band.”
According to MAS, this reflected renewed expectations of tightening in the US monetary policy and “a rise in global risk aversion, mainly stemming from fears of a more significant downturn in China and other emerging market economies.”
Meanwhile, the central bank said the economy registered marginal growth of 0.1 percent on a quarter-on-quarter in the third quarter, following the 2.5 percent contraction previously, advanced estimates revealed. This allowed the economy to avoid a technical recession.
“The overall outlook for the global economy has softened compared to the review in April. While the US economy is likely to expand at a stronger pace on robust private consumption, its import demand has been weak. In the Eurozone and Japan, the pickup in economic activity is envisaged to be gradual. China’s growth momentum is easing on a sharp deceleration in investment growth,” said MAS in a statement.
“Taken together, these factors will weigh on the region’s commodity producers and trade-dependent economies. As a consequence, the growth outlook for Asia ex-Japan as a whole has dimmed,” it added.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
