Singapore's MAS likely to ease in October

Singapore's CPI fell in August for the tenth consecutive month to the lowest since 2009. There is a non-negligible risk of Singapore slipping into technical recession following the weaker than expected industrial production numbers in July (-6.1%y/y). 

Singapore's key electronics and pharmaceuticals sectors are buckling under the combined weight of weak demand, both domestically and externally. There are significant downside risks to MAS's inflation and growth forecasts. 

"MAS's 2015 GDP growth forecast of 2-4% appears a little too optimistic. SME business confidence underscores these concerns. Confidence is at the lowest level since 2013 with an uncompetitive exchange rate and waning external growth momentum" says RBC capital markets.

MAS decided to maintain its policy of a modest and gradual appreciation of the S$NEER policy band in April with no change to the slope and width of the policy band, and the level at which it is centred. But there remains a significant risk the MAS will be forced to ease monetary policy, on or before the next scheduled Monetary Policy Statement in October.