Core inflation steadies at three-year low; MAS monitors global trade implications.
Slowing inflation in Singapore has created room for the Monetary Authority of Singapore (MAS) to consider easing its monetary policy. However, analysts believe the central bank may delay action until later in 2025 to fully assess the potential impact of incoming US President Donald Trump’s trade policies.
The Monetary Authority of Singapore (MAS) faces a delicate balancing act as inflation levels ease. With core inflation expected to hold steady at 2.1%, analysts are split on whether MAS will ease its policy in January or wait for greater clarity on global trade disruptions potentially triggered by the Trump administration.
November inflation data is projected to remain at 2.1%, a three-year low, signaling price stability. DBS Bank forecasts inflation will average 1.8% in 2025, aligning with MAS’s expectation of around 2% for the fourth quarter.
Unlike many countries, Singapore doesn’t rely on interest rates but instead uses the Singapore dollar nominal effective exchange rate (S$NEER) to manage its monetary policy. Adjustments can be made to the slope, mid-point, or width of the S$NEER band.
Analysts at Moody’s Analytics and DBS Bank suggest MAS will likely delay easing until it can evaluate the effects of Trump’s trade policies. Economists argue for waiting until inflation consistently falls below 2% over several months.
Maybank’s Chua Hak Bin anticipates a January easing, citing the likelihood of inflation dropping further and growth moderating to 2.6% in 2025 from 3.6% in 2024. Conversely, other analysts caution against preemptive adjustments.
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Trade disruptions from Trump’s tariffs and a diversion of China’s excess production to global markets are expected to lower import prices for Singapore. Such deflationary pressures may influence MAS’s timeline for easing policy.
For Singaporeans and businesses, MAS’s cautious approach underscores a stable economic environment in the near term, even as uncertainties loom globally. International visitors and investors can expect continued strength in the Singapore dollar, making it a favorable period for robust trade and tourism.
Singapore’s inflation is steady at a three-year low of 2.1%, sparking debate over monetary easing. Analysts recommend that MAS wait to evaluate Trump-era trade policies before making adjustments, as economic growth is projected to moderate in 2025.
Sources: Reuters, Asia One (2024)
Keywords: Slow Inflation, Policy Shift, Singapore
