Friday, August 10, 2007

MAS Ready To Inject Cash Into Market If Needed

Source : Channel NewsAsia, 10 August 2007

SINGAPORE - Singapore's central bank is prepared to inject cash into the market to stabilise any fallout arising from problems in US sub-prime mortgages, an official said Friday.

But Ong Chong Tee, deputy managing director of the Monetary Authority of Singapore (MAS), said there was no need to do so at the moment and the central bank was sticking to existing monetary policy.

"In terms of domestic market liquidity, if there are liquidity bottlenecks, certainly we will come in to inject more liquidity," he told a media briefing.

"But at this stage, the liquidity management is unchanged in the sense that we do not see any undue problems."

Ong said the MAS, the city-state's central bank, "will be watching the situation closely."

In a separate statement issued after the stock market closed, the MAS noted that the "domestic markets have generally functioned smoothly" on Friday.

"The MAS does not comment on the specifics of our market operations which continue to be directed at ensuring sufficient liquidity conditions in the money markets and banking system, taking into account the various exogenous factors that impact on liquidity," it said.

"However, given current global market conditions, we would like to reiterate that the Authority stands ready to inject additional market liquidity if the situation so warrants."

Singapore's Ministry of Trade and Industry, which announced better-than-expected second quarter economic growth on Friday, said separately that an escalation of the troubles in US sub-prime credits is a potential risk.

The ministry raised its economic growth forecast this year to between 7.0 and 8.0 percent from 5.0 and 7.0 percent, saying the trade-dependent economy should benefit from the stronger economies of its major trading partners.

But it said "the chief downside risk to this favourable external outlook is the potential for current problems in the US credit markets spreading to other financial markets and possibly dragging down consumption and investment." - AFP/ir

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