SINGAPORE: MAS Holds On Resilient Growth, Easing Risks To Persist Into 2026
As expected, the MAS kept its policy parameters unchanged at the Oct policy meeting. Market reaction has been muted, with USD/SGD down a touch, last near 1.2990. We dipped towards 1.2980 post the on hold outcome. The SGD NEER per Goldman Sachs estimates is a touch firmer at -0.94% from the top end of the band, we were closer to -1% prior to the decision. The market bias is likely to fade SGD NEER bounces, with easing risks likely to persist from the MAS as we head into 2026 (as growth comes off the boil). For USD/SGD broader USD trends will be important in the near term, SGD FX maintains a positive correlation with USD/JPY moves. If USD/SGD can test through the 200-day EMA (1.3015) a move up to 1.3100 could be targeted. The 100-day EMA support point is back at 1.2910/15.
- The central bank noted, "MAS has eased monetary policy twice this year. Singapore’s economic growth has turned out stronger than expected and the output gap will remain positive in 2025 and come in around 0% next year. MAS Core Inflation should trough in the near term and rise gradually over the course of 2026 as temporary factors dampening inflation fade. MAS will therefore maintain the prevailing rate of appreciation of the S$NEER policy band. There will be no change to its width and the level at which it is centred."
- With the policy announcement came the advanced Q3 GDP print, which was stronger than expected, up 1.3% q/q (versus 0.6% forecast), while in y/y terms we printed at 2.9% (2.0% was forecast and 4.5% was the Q2 outcome). This reinforces today's on hold outcome.
- On growth, the central bank noted: "In 2026, GDP growth is projected to slow in line with external developments to a near-trend pace, such that the output gap narrows to around 0%. The GDP growth forecasts for 2025 and 2026 will be announced in November by MTI.
- On inflation: "All in, MAS Core Inflation is forecast to trough in the near term and rise gradually thereafter. It should average around 0.5% for 2025 as a whole and come in between 0.5−1.5% in 2026.... The inflation outcome is subject to risks. Supply shocks, including those stemming from geopolitical developments, could lift some imported and shipping costs abruptly. Conversely, core inflation could stay lower for longer should growth be more hesitant and weaker than projected. Another significant decline in global oil prices could also temporarily tamp down the pace of price increases."
- These will be watch points for easing risks into 2026.
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AUSSIE 3-YEAR TECHS: (U5) Bounces Further Off Support
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.550 @ 15:36 BST Sep 12
- SUP 1: 96.430/95.900 - Low Sep 3 / Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures are trading off recent lows. A resumption of gains from here would further narrow the gap with resistance at 96.730, the Sep 17 ‘24 high, leaving 96.860 as the next key level. Any continuation lower would instead strengthen a bearish threat. This would refocus attention on 95.760, the 14 Nov ‘24 low. Conversely, a reversal higher would open 96.860, the Apr 7 high.
FED: MNI Fed Preview-September 2025: A Reluctant Return To Easing
We've published our preview of the upcoming FOMC meeting - Download Full Report Here
- The Federal Reserve is set to resume its easing cycle at the September 16-17 meeting with a 25bp cut to the funds rate range to 4.00-4.25%.
- The decision to cut after a 5-meeting pause was well-telegraphed by Chair Powell, whose Jackson Hole speech described a “shifting balance of risks” toward a weaker labor market that “may warrant adjusting our policy stance”.
- The updated quarterly projections aren’t likely to bring many changes to the macroeconomic variables, but as usual the signal sent from the Fed rate “Dot Plot” will garner attention. A Committee split between expecting one or two further cuts this year is likely, keeping each of the remaining meetings of 2025 “live”.
- The Statement will downgrade the description of the labor market to reflect a rise in the unemployment rate and poor payrolls growth, and is likely to include at least one dissent to the rate decision.
- But with a Committee that is fairly divided on the way forward, Powell will be noncommittal on future action, reiterating that policy is not on a preset course, and upcoming decisions will be data-dependent.
- A key undercurrent is an increasingly activist approach to Fed personnel management from the White House, which leaves the composition of the FOMC uncertain not just over the medium-term but also at this meeting.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Sep 15
RATINGS: Fitch: France Cut To A+ From AA, Portugal Up To A From A-
Fitch has downgraded France's sovereign rating to A+ (with stable outlook) from AA-. Release here.
- Among other factors in the decision, Fitch cites "High and Rising Debt Ratio", "Political Fragmentation Hinders Consolidation", "Weak Fiscal Record", "High 2025 Deficit", "Uncertain Fiscal Consolidation Path", and "Fiscal Rigidities".
- In "Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade", Fitch cites "Public Finances: A sustained increase in government debt/GDP over the medium term, due to failure to implement fiscal consolidation measures and/or a persistent increase in financing costs" and "Macro: Materially lower economic growth prospects and weakened competitiveness." Conversely, potentially leading to positive ratings action would be "Public Finances: Confidence that government debt/GDP will be put on a downward trajectory over the medium term, for example, due to fiscal consolidation and/or stronger economic growth".
- Fitch also raised Portugal to A (stable outlook) from A-, while elsewhere, S&P raised Spain to A+ (stable outlook) from A.
- As MNI wrote earlier, we expected France to be downgraded to A+ and Portugal to be upgraded to A.
