(Bloomberg) — Singapore’s central bank is likely to keep monetary policy unchanged Wednesday as it allows fiscal measures to do the heavy lifting in getting the city-state’s economy back on track.

The Monetary Authority of Singapore, which uses the currency as its main policy tool rather than interest rates, probably will refrain from changing any of the three currency band settings, according to all 19 economists surveyed by Bloomberg.



chart: Singapore Monetary Policy History


© Bloomberg
Singapore Monetary Policy History

The MAS — which typically makes policy decisions twice a year, in April and October — took the unprecedented step in its last announcement of lowering the midpoint of the currency band and reducing the slope to zero. That meant it would allow for a weaker exchange rate to head off deflation and support the export-reliant economy.

Loading...

Load Error

Since then, the economy has plunged into recession amid the pandemic and the government has unleashed billions of dollars of stimulus to save businesses and jobs. The city-state is slowly starting to shake off the impact of mobility restrictions and exports have continued to gain, but the recovery is likely to be a slow one as international travel restrictions remain and global demand stays weak.

“We’ve not seen the full extent of the crisis” and as much as 20% of the economy will face “deep scarring from which they may not recover,” MAS Managing Director Ravi Menon said Monday during a virtual forum hosted by the Institute of International Finance.

While the city-state has likely seen the worst of the GDP downswing, Menon said non-performing loans and bankruptcies probably will rise through the start of 2021.

The government has forecast a 5%-7% contraction in the economy this year, the worst since independence more than a half-century ago, and may revise that estimate when the Ministry of

(Bloomberg) — Singapore’s central bank is likely to keep monetary policy unchanged Wednesday as it allows fiscal measures to do the heavy lifting in getting the city-state’s economy back on track.

The Monetary Authority of Singapore, which uses the currency as its main policy tool rather than interest rates, probably will refrain from changing any of the three currency band settings, according to all 19 economists surveyed by Bloomberg.



chart: Singapore Monetary Policy History


© Bloomberg
Singapore Monetary Policy History

The MAS — which typically makes policy decisions twice a year, in April and October — took the unprecedented step in its last announcement of lowering the midpoint of the currency band and reducing the slope to zero. That meant it would allow for a weaker exchange rate to head off deflation and support the export-reliant economy.

Loading...

Load Error

Since then, the economy has plunged into recession amid the pandemic and the government has unleashed billions of dollars of stimulus to save businesses and jobs. The city-state is slowly starting to shake off the impact of mobility restrictions and exports have continued to gain, but the recovery is likely to be a slow one as international travel restrictions remain and global demand stays weak.

The government has forecast a 5%-7% contraction in the economy this year, the worst since independence more than a half-century ago, and may revise that estimate when the Ministry of Trade & Industry releases advance third-quarter figures on Wednesday. Analysts project gross domestic product rebounded an annualized 33.5% on a quarterly basis in the three months through September, while declining 6.8% from a year earlier, Bloomberg survey data show.



chart: Bouncing Back


© Bloomberg
Bouncing Back

Here’s a look at what’s expected in the central bank’s statement, which is due to be released at 8 a.m. local time on Wednesday:

Policy Band

The MAS

(Bloomberg) — The Philippine central bank is set to leave its key interest rate unchanged for a second straight meeting, allowing previous stimulus steps to work their way through an economy in recession.

Bangko Sentral ng Pilipinas will keep the benchmark rate at 2.25% Thursday, according to all but one of the 20 economists surveyed by Bloomberg. At its last rate meeting in August, the central bank embarked on a “prudent pause” following 175 basis points of reductions this year and other liquidity measures.

Policy makers will “allow more time for previous measures to feed through to the economy and for BSP to assess their effects,” said Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore.



chart: Deep Dive


© Bloomberg
Deep Dive

That prior easing has yet to trickle down to the real economy, with consumer confidence falling to the weakest level on record in the third quarter. With private consumption making up more than 70% of the Philippine economy, the weak sentiment “says a lot about the outlook” for the recovery, and could prompt policy makers to provide “dovish forward guidance,” Paracuelles said.

Loading...

Load Error

The peso has risen more than 4.5% this year, beating all its peers in Asia. The currency climbed to its strongest level in almost four years in September.

Here’s what to watch out for in Thursday’s decision:

Policy Space

While consumer-price increases remain below the midpoint of the BSP’s 2%-4% target, the inflation-adjusted interest rate is already below zero. Analysts are watching for signals about the bank’s ability and willingness to provide further monetary support.

“BSP still has the monetary buffer to perform rate cuts, and the market is looking out for further hints on that front,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore.



a circuit board: Philippines real interest rate falls below zero


© Bloomberg
Philippines real interest rate falls