MAS likely keep monetary policy steady to contain inflation

MAS likely keep monetary policy steady to contain inflation

SINGAPORE - Singapore's central bank will likely keep monetary policy steady when it releases its half-yearly statement on Friday as it prioritises containing inflation over trying to boost an economy that is barely growing.

The Monetary Authority of Singapore (MAS) is expected to maintain the current appreciation path for the Singapore dollar, according to 15 of 16 forecasters polled by Reuters ahead of the statement, which will be published at 0000 GMT on Friday.

The no-change call is being made despite expectations of anaemic growth in the first quarter. The advance GDP estimates, expected at the same time as the MAS statement, are likely to show the economy grew by just 0.2 per cent in first quarter of 2013 from a year ago, as weakness in manufacturing offsets an improvement in financial services and tourism.

Compared with the last three months of 2012, the economy probably expanded by 0.7 per cent at a seasonally adjusted and annualised rate.

Most economists, however, expect growth to accelerate in coming months, helped by an expected turnaround in electronic exports and continued strength in construction as the government races to improve infrastructure that had lagged the growth in Singapore's population due to immigration.

"There is no impetus for MAS to relax policy," said DBS economist Irvin Seah. "This year, the story on the global economic front is one of normalisation... MAS did not loosen policy last year which was a difficult year when Singapore twice almost entered into a recession."

A further tightening in monetary policy is not expected either as inflation, although high by historical standards, has probably peaked, helped by government measures to keep car and accommodation costs in check, he added.

Singapore manages monetary policy by letting its dollar rise or fall against the currencies of its main trading partners within an undisclosed trading band.

MAS can adjust the slope of the trading band to indicate whether it favours allowing the Singapore dollar to appreciate at a faster or slower pace, or it can force a one-time rise or fall in the value of the local currency by adjusting the midpoint of the policy band.

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