Bar high for further policy easing by Monetary Authority of Singapore in October

Singapore's second quarter GDP saw a robust growth, highest in five quarters. The advance estimate of headline GDP grew by 2.2 percent y/y in the three months to June 30, up from the upwardly revised 2.1 percent pace (previously 1.8 percent) in the March quarter. This was right in line with the average expected by economists, and the fastest pace of growth since the March quarter of 2015.

The rise was supported by a rebound in manufacturing and services. That said, growth is still subdued and job retrenchment in the services sector increased in 2Q alongside a slightly higher unemployment rate of 2.1 percent.

The Monetary Authority of Singapore (MAS) recently upgraded its inflation outlook compared to its view in April. The MAS expects headline inflation to turn positive in the near future and core inflation was seen closing in on the historical average of around 2 percent next year from a likely average of 1 percent in 2016.

The MAS said it also was closely watching risks related to Brexit, the US economic recovery and the slowdown in China. It noted that unless there is a marked deterioration in the global economy or significant shift to the inflation outlook, there is no need to change the monetary policy stance.

The recently upgraded inflation outlook and growth expectations to hold up in 2H suggests a high bar to further policy easing in October.