Singapore’s central bank eases policy as city-state braces for recession sparked by coronavirus pandemic

Signage for the Monetary Authority of Singapore (MAS) is displayed outside the central bank’s headquarters in Singapore.

Sam Kang Li | Bloomberg | Getty Images

Singapore’s central bank sharply eased its monetary policy on Monday, with the city-state’s bellwether economy bracing for a deep recession due to the coronavirus pandemic.

The Monetary Authority of Singapore (MAS) said it would adopt a zero percent per annum rate of appreciation of the policy band starting at the prevailing level of the S$NEER, currently slightly below the mid-point of the policy band.

MAS — which manages monetary policy through exchange rate settings, rather than interest rates — said there will be no change to the width of the policy band.

Economists said the changes marked the most aggressive easing in years, as the central bank also lowered its outlook for headline and core inflation to -1% to zero percent for 2020.

“It seems to be one of the most aggressive policy moves that MAS has taken,” said Maybank Kim Eng Securities economist Lee Ju Ye. “They’re now basically looking at negative growth and negative inflation.”

All nine economists in a Reuters survey this month expected the central bank to ease as policymakers worldwide step up efforts to limit the economic damage from the fast spreading virus.

Singapore is among the world’s most open economies and is seen as a bellwether for the health of the global trade.

The Southeast Asian trade, travel and finance hub is bracing for the worst recession in its 55-year history and last week lowered its 2020 GDP forecast range to -4% to -1% after a sharp contraction in the first quarter.

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