S$NEER likely to remain elevated and rise towards upper bound of MAS S$NEER policy band finally, says Scotiabank

The S$NEER is expected to remain elevated and to rise towards the upper bound of the MAS S$NEER policy band finally, with the SGD’s outperformance to continue in the run-up to the APEC Summit set for November 16-17, according to the latest research report from Scotiabank.

The MAS core inflation eased slightly further to 0.7 percent y/y in September from 0.8 percent y/y the previous month, largely due to a steeper fall in utility prices. It justified the MAS reducing the slope of its S$NEER policy band on October 14.

In a statement dated October 23, the city-state’s monetary authority said it expects the core inflation to come in at the lower end of the 1-2 percent forecast range in 2019, and average 0.5-1.5 percent next year.

However, the SGD has been outperforming the S$NEER basket of currencies since late August when the US and China started seeking to ease their trade tensions.

According to the US Commerce Department, US retail sales decreased a seasonally adjusted 0.3% in September from a month earlier, the first monthly decline since February.

As consumer spending accounts for more than two-thirds of the US economy, more Fed monetary easing is needed to help weather the economic downturn. It would sustain risk-on sentiment in general, the report further noted.