MAS now unlikely to ease policy

A sharp plunge in IP increases the risk of a technical recession and possible easing.

Here's more from Bank of America Merrill Lynch:

No longer confident that MAS will ease policy
We are re-assessing our Monetary Authority of Singapore (MAS) policy easing call after having digested the CPI August press release and data, which came in at a higher than expected +3.9% year-on-year (vs. +4% in July) and a strong +0.6% on a month-on-month basis.

Bottomline is that we are no longer confident that MAS will ease the current slightly steeper modest and gradual S$NEER appreciation stance at the mid-October meeting (a call we had for the last few months). FX Strategist Christy Tan has closed her short S$NEER call.

We will wait for the August Industrial Production (out Wed 26 Sep), before finalizing our call. A sharp plunge in IP increases the risk of a technical recession and possible easing. Recent employment readings however (+29.2K in 2Q, +27.2K in 1Q) do not point to a sharp slowdown, with surveys still pointing towards healthy positive net hiring in coming quarters.

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