MAS warns pain likely to linger

  • “Amid weakening external demand, the Singapore economy is projected to slow to a below-trend pace in 2023,” the central bank said in its latest Financial Stability Review report. “Inflation is expected to remain elevated, underpinned by a strong labour market and continued pass-through from high imported inflation.”
  • Warning of contagion risk from global markets, the central bank said the nation’s corporate, household, and financial sectors should “stay vigilant” amid the macroeconomic challenges that lie ahead.
  • “The most immediate risk is a potential dysfunction in core international funding markets and cascading liquidity strains on non-bank financial institutions that could quickly spill over to banks and corporates,” it said.
  • JPMorgan analysts said while they expect core inflation levels to remain elevated until the first quarter of next year, they predict the readings that follow will show more easing. That would leave room for the central bank to step away from a hawkish stance.
  • “If this forecast materialises, this suggests little need for the MAS to tighten its NEER policy next year,” the firm said in a note.
  • Minutes from the latest Federal Reserve meeting released this week said that smaller interest rate hikes should happen “soon” — an indication that its global peers, including the MAS, could also take a breather from their own tightening cycles.
  • “MAS is in a similar position too — it has tightened monetary policy a lot in 2022 and will want to see how the impact plays out,” said BofA Securities ASEAN economist Mohamed Faiz Nagutha.
  • “This means further tightening is not a given, but also cannot be ruled out at this juncture,” he said.

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