SINGAPORE’S CENTRAL BANK signaled it’s ready to adjust monetary policy further after easing Monday for the first time since 2016 as risks to the economic growth outlook persist.

The Monetary Authority of Singapore (MAS), which uses the exchange rate as its main policy tool, reduced “slightly the rate of appreciation” of the currency band and said it’s prepared to “recalibrate monetary policy” if prospects for inflation and growth weaken significantly.

Data Monday showed the economy narrowly missed falling into recession in the third quarter, but the MAS was downbeat about growth prospects and sees inflation remaining benign. The US-China trade war has weighed heavily on the export-reliant city state, with manufacturing taking the brunt of the pain.

“We thought the final sentence in the statement — that MAS ‘is prepared to recalibrate monetary policy should prospects for inflation and growth weaken significantly’ — is telling of its intentions,” said Terence Wu, a currency strategist at Oversea-Chinese Banking Corp. in Singapore. “For now, we do not rule out a further reduction of slope to zero appreciation in the next meeting.”

The Singapore dollar gained as much as 0.4% to S$1.3679 against the US dollar Monday. The Straits Times Index climbed 0.5% as of 10:15 a.m. in Singapore.​

The monetary policy decision was predicted by 14 of the 22 economists surveyed by Bloomberg, with the remainder projecting a more aggressive move to a zero-appreciation posture for the currency band. The MAS held policy in April after tightening twice last year.

​Central bankers globally are taking a more dovish stance as trade tensions weigh on growth and as manufacturing weakness threatens to spill over into services sectors. In Singapore, authorities have taken a gradual approach as they monitor risks and keep a close watch on labor-market indicators that so far have stayed resilient.

An early reading of gross domestic product (GDP) data Monday showed the economy grew an annualized 0.6% in the third quarter from the previous three months, rebounding from a contraction of 2.7%. The median estimate in a Bloomberg survey of economists was for growth of 1.2%. Compared with a year ago, GDP rose 0.1%, unchanged from the second quarter.

“GDP numbers, despite skirting a technical recession, do not make for an upbeat read,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “The manufacturing recession continues. The outlook is at best hazy, if not gloomy.”

Singapore’s growth is expected to pick up modestly next year, “although this projection is subject to considerable uncertainty in the external environment,” the MAS said.

“We think the MAS’ core inflation forecast for 2020 suggests the door for further easing is open, if needed,” said Divya Devesh, head of Southeast and South Asia currency research at Standard Chartered Plc in Singapore.

The MAS guides the local dollar against a basket of its counterparts and adjusts the pace of its appreciation or depreciation by changing the slope, width and center of a currency band. It doesn’t disclose details of the basket, or the band or the pace of appreciation or depreciation. — Bloomberg

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