SINGAPORE - Easing monetary policy is unlikely to be an option for the central bank this Friday, despite poor export and output numbers this first quarter.
Economists and currency analysts are expecting the Monetary Authority of Singapore (MAS) to keep the Singapore dollar on its current path of a slightly steeper appreciation relative to a basket of trading partners' currencies, to ward off inflationary pressures.
They are certain that there will be no change to both the midpoint and width of the policy band within which the trade-weighted Singapore dollar is allowed to fluctuate. And the few who would admit the possibility of a reduction in the band's slope, slowing the pace of appreciation, say that is a remote risk.
That small risk stems from weaker than expected export, manufacturing and retail sales figures for January and February, reflecting still subdued global growth. By some estimates, the Singapore economy even contracted slightly in Q1 from the previous quarter.
Flash GDP estimates for the quarter will also be released this Friday.
In addition, economic restructuring will exact its price of slower short-term growth.
"Domestically, we expect the 'hollowing out' of more labour-intensive industries will intensify this year, and the drag may not be offset by the emergence of new industries or by pockets of strength in construction and some domestic demand-oriented services," said the Barclays research team in a report on the upcoming policy statement.
Barclays' analysts noted that the real effective exchange rate has risen strongly in recent years, suggesting some loss in export competitiveness relative to trading partners, which a reduction in the policy band's slope could help shore up.
However, history shows that the MAS places less emphasis on growth than it does on core inflation, the Barclays team said. The government has also said that it is prepared to accept slower economic growth in the near-term, as Singapore moves towards a more sustainable, productivity-driven growth.
A policy prescription of "no change" this Friday would accept that trade-off and would be comfortable with the current official 2013 forecast of 1-3 per cent growth, said Mizuho Corporate Bank economist Vishnu Varathan.
This is because it is inflation that remains the greater worry - and not just because February's inflation rate surged to an unexpected 4.9 per cent after falling to 3.6 per cent in January.
That was less alarming than it looked, since it was in part due to a seasonal Chinese New Year hike in food prices. Recent administrative measures to cool the property and car measures may help to temper headline inflation too.