Singapore: Monetary Authority of Singapore loosens monetary policy in January
First S$NEER slope reduction since Covid-19 pandemic: At its first quarterly monetary policy meeting of 2025 on 24 January, the Monetary Authority of Singapore (MAS) decided to slightly reduce the prevailing rate of appreciation of the Singapore dollar’s nominal effective exchange rate (S$NEER) policy band, while keeping the width of the policy band and the level at which it is centered unchanged. The move was the first policy loosening in almost five years and had been anticipated by markets.
Softer inflation and GDP growth projections drive the move: Two key drivers were behind MAS’s move: Core inflation cooled by more than expected in Q4 compared to Q3, pushing the MAS to downwardly revise its 2025 average core inflation forecast from 1.5–2.5% to 1.0–2.0%. Moreover, global economic policy uncertainty is expected to weigh on GDP growth over 2025 due to higher trade frictions; the MAS now projects the economy to expand at a slower pace of 1.0–3.0% this year, down from 4.0% in 2024.
Geopolitical uncertainty clouds the outlook: In its communique, the MAS stated that it “will closely monitor global and domestic economic developments and remain vigilant to risks to inflation and growth,” but it did not provide any explicit forward guidance. Most of our panelists expect further monetary policy loosening before the end of 2025 due to softer economic growth and declining inflation. Stronger-than-expected core inflation could halt the policy easing cycle, while weaker-then-anticipated economic growth could prompt the MAS to loosen its policy settings more aggressively. Changes to U.S. trade policy remain a key factor to watch.
The Bank is set to reconvene before 14 April.
Panelist insight: Commenting on the outlook, Nomura analysts stated:
“Overall, in our current baseline scenario, MAS further eases its FX policy at the April 2025 policy announcement. This would likely be another slight reduction in the annualised rate of appreciation of the S$NEER policy band to 0.5%, from our current estimate of a 1.0% rate. This is based on our view that core inflation will continue to slow in coming months, while global growth uncertainties could rise. Although not our baseline, a more substantial negative growth shock from a more aggressive tariff policy from President Trump would risk MAS easing more aggressively. That could include reducing the slope of FX appreciation to zero or even more aggressively through a zero slope and a re-centering of the mid-point of the policy band lower.”
On a more hawkish note, Rina Jio and Andrew Tilton, analysts at Goldman Sachs, commented:
“Going forward, we expect the MAS to keep the policy parameters unchanged with slope of 1.0%/annum (GS est.) throughout 2025 barring any significant shocks.”