Singapore central bank stands pat on monetary policy as growth eases

By John Geddie and Fathin Ungku

SINGAPORE (Reuters) - Singapore's central bank on Friday kept its monetary settings unchanged after two consecutive rounds of tightening, as policymakers expect slower growth and inflation for the city state in the face of 'significant' global economic risks.

The Monetary Authority of Singapore (MAS), which manages policy through exchange rate settings rather than interest rates, said it would maintain the slope of the Singapore dollar's policy band while keeping the width and level at which the band is centred unchanged.

Seventeen out of 20 economists in a Reuters poll predicted no change to policy amid slowing global growth and softening domestic demand.

"GDP growth in the Singapore economy has eased, bringing the level of output closer to its underlying potential", MAS said in its semi-annual statement, adding "inflationary pressures are mild and should remain contained."

MAS increased the slope of the policy band twice last year in efforts to control rising price pressures and strengthen its currency in its first such tightening moves in six years.

The Singapore dollar was broadly unchanged after the decision.

TWO-PRONGED RISK

Across Asia, an abrupt end to policy tightening in the United States - the world's largest economy - have seen markets betting on outright rate cuts or easier policy stance for a growing list of central banks.

A tariff dispute between the United States and China - two of Singapore's biggest export markets - has disrupted global supply chains in a blow to growth in many trade-reliant economies including the city state.

Singapore on Friday revised down its 2019 core inflation forecast - a measure closely watched by economists - to 1 to 2 percent, from 1.5 to 2.5 percent previously, following an earlier downgrade to its headline inflation view in February.

Policymakers said full-year growth would likely come "slightly below the mid-point" of the central bank's expected 1.5-3.5 percent range.

Preliminary data for first-quarter gross domestic product (GDP), also released on Friday, confirmed the city-state was experiencing its weakest year-on-year growth in almost a decade, according to trade ministry data.

"The growth momentum of the global economy has moderated by more than expected at the turn of the year alongside sluggish trade. Significant uncertainty remains over the short-term outlook," MAS said.

Manufacturing, once a key pillar of growth for the affluent city-state, showed a shock 12 percent drop in the first quarter from the three months before, weighed down by a sluggish electronics sector.

"The uncertainty for the Singapore economy still remains the same, a two-pronged risk – U.S.-Sino trade relations and the maturing of the global electronics cycle," said Barnabas Gan, an economist at United Overseas Bank.

(Additional reporting by Aradhana Aravindan, Joe Brock, Anshuman Daga and Ed Klamann; Graphics by Gaurav Dogra and Patturaja Murugaboopathy; Editing by Shri Navaratnam)