Singapore: Monetary Authority of Singapore eases its stance in April
Second consecutive S$NER slope reduction: At its meeting on 14 April, the Monetary Authority of Singapore (MAS) decided to slightly reduce the prevailing rate of appreciation of the Singapore dollar’s nominal effective exchange rate (S$NEER) policy band, while keeping the width of the policy band and the level at which it is centered unchanged. The decision was the second consecutive policy easing move after remaining invariant for almost five years, and aligned with market expectations.
Softer inflation and economic growth forecasts underpin decision: Two key drivers were behind MAS’s move. Lower-than-expected core inflation at the outset of 2025 led the MAS to downwardly revise its 2025 average core inflation forecast from 1.0–2.0% to 0.5–1.5%. Moreover, escalating trade frictions are expected to weigh on GDP growth over 2025, and, as a result, the MAS further downgraded its 2025 GDP growth forecast band from 1.0–3.0% to 0.0–2.0%.
MAS expected to ease more: The communiqué did not provide any explicit forward guidance. That said, weaker economic growth and waning inflation have pushed most of our panelists to expect further monetary policy loosening before the end of 2025. Higher-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. U.S. trade policy and possible retaliations remain key factors to watch.
The Bank is set to reconvene before 31 July.
Panelist insight: Commenting on the outlook, Nomura’s analysts stated:
“We assign a 60% likelihood to the MAS reducing the S$NEER slope to zero, from our current estimate of a 0.5% rate. This is likely to materialise if Singapore’s? growth and inflation evolve broadly in line with today’s? new forecasts i.e., 2025 GDP growth of 0%-2%, core inflation of 0.5%-1.5%, and if trade uncertainty remains an overhang for the external sector outlook (as opposed to an abrupt collapse in global trade).”
Goldman Sachs’s Rina Jio and Andrew Tilton have a more hawkish outlook:
“Looking ahead, we continue to expect the MAS to keep policy parameters on hold until end-2025. However, given the global trade uncertainty and as the output gap turns negative alongside soft core CPI inflation, we see a significant risk of more easing from the MAS.”