Monetary Authority of Singapore seen on hold now, but easing cannot be ruled out

By Masayuki Kitano and Jongwoo Cheon

SINGAPORE (Reuters) - Singapore's central bank is expected to keep policy steady at next week's review, but a number of analysts say an easing this year remains a possibility in the face of slow growth, low inflation and depressed global demand.

There has been focus on the possibility of easing by the Monetary Authority of Singapore (MAS) after the 2016 official forecast for headline inflation was cut in February, and due to a lacklustre outlook for exports and the manufacturing sector.

Still, with the central bank having maintained its forecast for core inflation and fiscal spending in the government's 2016 budget expected to help support growth, most analysts see the MAS keeping its exchange-rate based policy unchanged.

The central bank's semiannual policy statement is due on April 14 at 0000 GMT, along with the government's advance estimate of first-quarter gross domestic product (GDP).

The MAS manages monetary policy by letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed trading band based on its nominal effective exchange rate (NEER).

"A close call in our view but no change in terms of slope, midpoint or width expected, given the reiteration of MAS core inflation forecasts and fiscal support," said Sim Moh Siong, FX strategist for Bank of Singapore, referring to the central bank's policy settings.

TWO EASINGS IN 2015

Twelve of 18 analysts in a Reuters survey said they expect MAS to keep policy steady after it eased twice last year, most recently in October and once at an unscheduled review in January 2015. [nL3N1791YC]

The remaining six analysts expect the MAS to ease policy, with the bulk of those forecasters expecting the central bank to reduce the slope of the policy band to zero percent. Most analysts estimate that the slope currently has an appreciation rate of 0.5 percent per year.

In a separate Reuters poll on first-quarter GDP, the median forecast was for growth of 0.2 percent from the previous quarter on an annualised basis. Compared to a year earlier, GDP probably grew 1.7 percent, the poll showed.

If the MAS were to hold off from easing this month, weak exports could increase the probability of the central bank easing policy in October, said Roy Teo, senior FX strategist for ABN AMRO Bank in Singapore.

Like its counterparts in Asia, Singapore's manufacturing sector has been hit hard by a collapse in demand from major trading partners, particularly China. The city-state's non-oil domestic exports fell 0.1 percent in 2015, the third straight annual drop.

In February, the MAS and the Ministry of Trade and Industry cut their 2016 forecast for all-items inflation to between -1.0 percent and 0.0 percent, citing falls in global oil prices and a drop in the prices of car permits.

The MAS, however, kept its 2016 forecast for core inflation, which it calls the most relevant indicator for monetary policy, unchanged at 0.5 percent to 1.5 percent.

This reflected the smaller weight of oil-related items in core inflation, as well as the exclusion of changes in private road transport costs, it said. [nL3N1612NT]

(Editing by Richard Borsuk)