Asian markets rallied yesterday amid expectations that the United States Federal Reserve would cut interest rates for the first time in a decade later this month to kick-start flagging growth.
New York Fed president John Williams had said on Thursday that policymakers could not wait for economic disaster to hit before adding stimulus. "This is very different from the Great Financial Crisis when inflation was high, which made it harder for central banks to cut rates pre-emptively," said Dr Chua Hak Bin, an economist at Maybank Kim Eng Research. Low inflation had reduced the risk.
If Singapore slips into a technical recession by the third quarter - meaning two consecutive quarters of GDP decline - it will justify the Monetary Authority of Singapore easing monetary policy, Dr Chua said. For Singapore, which has aimed to gradually appreciate the Singdollar against a basket of currencies, this could mean shifting to a"zero appreciation" bias, he said. A weaker currency spurs growth by making exports cheaper.
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