Singapore's central bank surprised markets with a between-meeting easing amid nearly non-existent inflation, sending the city-state's currency sharply lower.
"With material downward revision to the inflation outlook, MAS (Monetary Authority of Singapore) saw cause for preemptive action," Mizuho Bank said in a note Wednesday. "On the growth front, MAS also sounded more cautious, pointing to a mixed outlook for the global economy, which is likely to weigh on the export-oriented sectors."
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Without waiting for its scheduled April review -- or today's U.S. Federal Reserve's meeting -- the MAS Wednesday announced that it was reducing the slope of the Singapore dollar's appreciation against an undisclosed, trade-weighted basket of currencies. Rather than using interest rates, Singapore sets its monetary policy by adjusting the currency's trading range. The slope was last flattened in 2011 and this was the MAS' first unscheduled policy statement since 2001.
Inflation in the trade-dependent city-state has been on the wane despite rising labor shortages as the government limited the number of foreign workers. In December, the consumer price index fell 0.2 percent on-year after declining 0.3 percent in November as declining oil prices globally eased fuel costs and as housing costs were lower. The MAS cut its headline inflation forecast for 2015 to a band of negative 0.5 percent to 0.5 percent from 0.5-1.5 percent previously.