Updated: 03/20/2012 01:03

MAS likely to maintain its policy in April as inflation persists : Economists



MAS likely to maintain its policy in April as inflation persists : Economists

Experts say the Monetary Authority of Singapore or MAS is likely to maintain its monetary policy stance when its half-yearly policy review comes up in April. 

Economists expect the central bank to allow some appreciation of the Singapore dollar, to stem rising inflation. 

The latest MAS survey of forecasters indicated that inflation will hit 3.5% this year at the top end of the official forecast of 2.5 to 3.5%.

But some economists say Singapore's headline inflation could be even higher at 3.7%.

Volatile oil prices are likely to continue to plague the global economy, driving up inflationary pressures. 

Economists say non-tradable sectors such as retail and hospitality in particular could face higher service costs if manpower cost goes up. 

With prices trending higher, experts say the central bank is not likely to ease its monetary policy come April. 

BNP Paribas' Thio Chin Loo.

"Rents are still quite, COE prices are high and the other ones food and commodity prices are still relatively elevated. Such that they do not see an easing of inflation pressures in the immediate period and the elevated level of inflation, therefore suggest they aren't going to ease monetary policy significantly if at all."

Standard Chartered Bank's Edward Lee, "We expect the MAS to maintain its appreciation stance of the SGD NEER policy band. So, we estimate the appreciation at 2% per annum with no change on the width of the policy band or the centre of the band." 

The MAS manages the singdollar within an undisclosed, trade-weighted band. 

And experts say the gradual appreciation should put the currency at S$1.26 against the US dollar by year-end. 

Still, some economists say there's a limit to how far currency appreciation can counter inflation. 

DBS Bank's Irvin Seah, "I don't think we have seen the end of this build up in domestic cost pressure. There could be further upward pressure on domestic cost and this could actually push the headline inflation significantly higher than expected." 

However, many economists expect inflation to ease towards the end of 2012.

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