On Friday, Singapore announced the nation has loosened its monetary policy for the first time since 2020 due to a rapid decline in inflation and the potential for a growth slowdown.
The Monetary Authority of Singapore (MAS) revealed plans to slightly reduce the slope of the Singapore dollar nominal effective exchange rate (S$NEER) while reporting that the nation’s growth momentum is speculated to slow this year.
MAS also noted that core inflation “has moderated more quickly than expected,” and decided to lower its forecast for the figure, which excludes prices of accommodation and private transport, to an average of 1% – 2% in 2025, down from the previous projection of 1.5% – 2.5%.
As for the inflation, MAS confirmed its rate will remain below 2% this year, reflecting low and stable underlying price pressures. Headline inflation is forecast to average between 1.5% and 2.5% this year, compared to 2.4% last year.
Meanwhile, Singapore’s GDP growth is projected to slow to 1%-3% in 2025, compared to 4% in 2024. The authority indicated that changes in international trade policies may potentially pressure the domestic manufacturing and trade-related services sectors. As global trade scenarios shift, these industries could experience significant impacts.
MAS operates differently from other central banks by adjusting the Singapore dollar’s exchange rate against its main trading partners rather than altering domestic lending rates. This approach allows MAS to strengthen or weaken its currency, effectively managing the S$NEER without setting the exact exchange rate.
After Singapore decided to loosen its monetary policy, the Singapore dollar weakened slightly to 1.3556 against the US dollar. The city-state’s Straits Times index, however, climbed marginally.
