Singapore's another intermeeting easing likely before October

Singapore's external growth momentum is waning, as evidenced by non-oil domestic export growth falling by 0.2%y/y (consensus: 2.3%y/y). Meantime, CPI inflation was soft in May - the core reading fell from 0.4%y/y to 0.1%yy (cons: 0.4%y/y). While headline CPI inflation at the bottom of the MAS' forecast band of - 0.5% - 0.5%y/y, leaving little wiggle room. Therefore, SGD was an outperformer in June, but this is not expected to last due to internal factors, says RBC Capital Markets.

The IMF highlights that the risks to Singapore's growth outlook is tilted downward and the uncertain outlook could weigh on private consumption and investment. 

MAS's 2015 GDP growth forecast of 2-4% appears a little too optimistic, states RBC Capital Markets. Bogged down by uncertainties in the global economy, a tough operating environment at home and hiring pressures. The Singapore Business Federation and the DP Information Group business sentiment survey indicated that business confidence among SMEs is at its lowest ebb since early 2013. And despite a global upswing in the IT cycle, Singapore is not benefitting.

"We think MAS' decision 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 was a policy error and the MAS will be forced to ease monetary policy, potentially before the next scheduled Monetary Policy Statement in October", according to RBC Capital Markets.