Singapore's MAS likely to keep its monetary policy settings unchanged in April

Data released earlier on Wednesday showed that Singapore's core inflation which excludes the costs of accommodation and private road transport crept higher in February. MAS’s core inflation rose 0.5% y/y, compared to 0.4% in the previous month, owing to higher food prices.

However headline inflation remains entrenched in negative territory, owing to a continued decline in the costs of private transport and accommodations. Singapore’s headline inflation in February contracted 0.8% y/y, from a 0.6% decline in the preceding month.

An increase in the labour market slack will also keep core inflation soft and increase the chances of another policy easing. Core inflation is likely to rise gradually as the disinflationary effects of oil and budgetary one-off measures fade in y/y terms. The MAS’s core inflation forecast for 2016 is at 0.5–1.5%.

"While we expect the MAS to maintain its monetary policy settings in April, we still see a risk of easing later in the year if the growth and inflation outlook worsens," said ANZ Research in a note to clients.