Economic slowdown and easing inflation prompt MAS to revise inflation forecasts for 2025.
The Monetary Authority of Singapore (MAS) has loosened its monetary policy for the first time since March 2020, citing a decline in inflation and slower economic growth. The move, announced on Friday, includes a slight reduction in the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band.
The MAS has acted to ease its monetary policy for the first time in nearly five years to address easing inflationary pressures and a projected slowdown in economic growth. This adjustment was revealed in its January monetary policy statement released on January 24, 2025. Unlike most central banks, MAS manages monetary policy through the Singapore dollar’s exchange rate against a basket of trading partner currencies.
Inflation Projections Revised
MAS lowered its core inflation forecast for 2025 to an average of 1–2%, down from an earlier projection of 1.5–2.5%. Headline inflation, which includes private transport and accommodation costs, is expected to average between 1.5% and 2.5%, a slight improvement from 2024’s 2.4%.
Economic Growth Slows
Singapore’s economic growth for 2025 is projected to slow to 1–3%, compared to 4% in 2024. Factors include shifts in global trade policies and challenges to domestic manufacturing and trade-related services sectors.
Policy Adjustment and Exchange Rate
The MAS reduced the slope of the S$NEER policy band while leaving its width and centre unchanged. This measured move ensures medium-term price stability as external conditions, such as lower global oil prices and stable food supplies, dampen imported inflation.
Global Economic Uncertainty
Rising trade frictions, tightening global financial conditions, and post-pandemic manufacturing adjustments weigh heavily on Singapore’s external trade-dependent economy. MAS remains vigilant to risks impacting inflation and growth.
Domestic Price Pressures
Government subsidies for healthcare, education, and public transport are expected to dampen essential service price inflation. Accommodation inflation is set to ease, partially offsetting a rise in private transport costs.
The policy easing means a moderated inflation environment and adjustments to growth expectations, signaling a cautious approach to economic stability. International visitors and investors can expect a stable economic framework supported by MAS’s proactive monetary measures, although external uncertainties remain a concern.
Keywords: Singapore monetary policy, MAS easing, Singapore inflation rate, Singapore economy, Singapore dollar exchange rate
