The US presidential election offers a different kind of risk – though still very much related to inflation and monetary policy outlook.
Heightened global market volatility, in particular the sentiment on the US bond market that influences the strength of the US dollar, would also be worth considering as the Nov 5 US presidential polls draw closer. November will also have a Fed rate-decision meeting.
If the result of the election or the Fed decision disappoints investors, they may express their displeasure by selling US assets. A sell-off in bonds would push yields higher and strengthen the US dollar, which will pressure other currencies and boost import costs.
Some analysts believe Singapore policymakers themselves would like to have a better understanding of the new US administration and its policies.
US presidential candidate Donald Trump has promised to use sweeping new import tariffs to fund everything from tax cuts to child care. But most economists estimate higher tariffs would increase import costs and boost the country’s deficit. Higher US inflation and increased government borrowing would send bonds yields up.
Mr Ang Kai Wei, Asean economist at Merrill Lynch (Singapore), said MAS on Oct 14 is likely to stick to a wait-and-see mode, especially ahead of the US election.
“MAS may need time for a more comprehensive assessment of the growth and inflation impact from future US policy directions,” he noted.
Robust growth in the US has been a key source of global economic resilience this year, in contrast to disappointing performances by China, the world’s second-largest economy, and Germany – the European Union’s biggest economy.
No matter who becomes US president, the US economy is projected to go into a cyclical slowdown in 2025.
But this year, Singapore’s economic growth may not need monetary policy support.
In fact, DBS Bank
