Monetary Policy Necessity Is So Blase

Oct. 14 (Bloomberg) — Singapore’s central bank maintained
its commitment to currency appreciation after the economy shrank
less than estimated last quarter, forgoing stimulus as labor
shortages and record home prices fuel inflation.

As expected.

GDP came better than expected on the quarter where a slowdown of of -4% QoQ was forecasted but the result was only a -1% drop which is still recessionary yet not as bad as we would imagine.

Keeping to the strong SGD would play to the global slowdown theme we are facing. A non recessionary slowdown for the moment with slower growth which is nonetheless still growth.

Core inflation is forecast lower for 2013 from 1.5-2.5% to 1.5-2% but MAS guidance is for higher 2014 core prices at 2-3% which is on the high side of their tolerance level.

It looks like manufacturing would continue to suffer with this strong SGD policy and will have to find their way around higher labour costs and the uncompetitive currency bit, to come up with cost savings and process efficient methods of work.

The USDSGD had a small reaction to the news today. Falling from its 1.2474 high at 742 am to a low of 1.2448 at 1025 am and holding at 1.2450 at the moment with the 200 day moving average as support for the past month, and the 3 month low of 1.2422 beckoning at us. If that goes, then 1.2350 will follow. Would expect the range to be 1.2350-1.26.

Interest rates, as such, will be low for a long time for the lucky ones with loans and reits. This policy signal is a long haul one, building the central bank a depot of reserves and ammunition for crisis management in the future.

Excuse me for being blase but it is pretty boring.

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