As expected, the Monetary Authority of Singapore (MAS) kept the slope of theSingapore dollar nominal effective exchange rate (S$NEER) policy band at zeropercent, with no change to the width of the policy band or the level at which itwas centred.    The MAS assessed it would be appropriate to maintain its neutral stance, amidbenign inflationary environment. In particular, it sees this year’s headline inflationto average at the bottom of the 0.5-1.5% range it expected earlier, while theMAS core average 1.5%, vs the 1-2% expected earlier. For 2018, the MAS sees arelatively stable MAS core inflation of 1-2%, while lowering the headline inflationrange to 0–1%. The MAS sees economy-wide cost pressures to remain relativelyrestrained, amid subdued wage and rentals pressure, although oil and food pricesare likely to head higher, modestly.    Although the surge in GDP growth in Q3 prompted the MAS to become moreoptimistic, noting that this year’s growth is likely to average at the upper halfof 2–3%, it tempered its enthusiasm somewhat with the view that growth couldmoderate next year. Having said that, however, it expects growth to be moreevenly distributed, with rebound in domestic-oriented services. According to theadvanced estimate, Singapore’s GDP growth accelerated sharply to 6.3%qoq saar(4.6%yoy) in Q3, from 2.4% (2.9%) in Q2, led by manufacturing. The latter surged23.1% (15.5%) in Q3, up from 3.2% (8.2%) growth in Q2, while constructioncontracted 9.2% (6.3%) vs. 2.4% (6.8% fall) in the same period. Meanwhile,services growth slowed to 1.5% (2.6%) in Q3 from 3.3% (2.5%) in Q2.    The MAS expects this year’s growth to remain below 3%, suggesting a relativelylarge payback in growth to below 2%yoy in Q4. Indeed, as mentioned in ourOctober Asia Economics monthly, we expect destocking to be a meaningful dragon growth during this quarter. Having said that, however, the surge in GDP growthin Q3 would add about 0.5ppts to our current growth forecast of 2.5% for 2017while posing 0.3ppts upside risk to our GDP growth forecast of 2.4% for 2018.    After the likely sharp slowdown in Q4, we expect a significant rebound in growthin Q1, with more even growth, prompting the MAS to adopt a more hawkishstance, as inflation prints largely above its expectations.

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