The Monetary Authority of Singapore said it will reduce slightly the slope of its exchange rate policy band.The Monetary Authority of Singapore said it will reduce slightly the slope of its exchange rate policy band.
Singapore on Friday loosened its monetary policy for the first time since 2020, citing a faster than expected decline in inflation and warning about a growth slowdown.
The Monetary Authority of Singapore said it would slightly reduce the slope of its exchange rate policy band, known as the Singapore dollar nominal effective exchange rate, or S$NEER.
In its release, MAS said Singapore’s growth momentum is expected to slow this year, and core inflation “has moderated more quickly than expected.”
It added that inflation will remain below 2% this year, “reflecting the return to low and stable underlying price pressures in the economy.”
Headline inflation is forecast to average 1.5%–2.5% in 2025, compared to 2.4% in 2024.
MAS also downgraded its forecasts for core inflation rate — which strips out prices of accommodation and private transport — to an average of 1%–2% in 2025, lower than the 1.5%–2.5% projected in its October 2024 monetary policy release.
Singapore’s GDP growth is projected to grow at 1%-3% over 2025, slower than the 4% seen in 2024.
“The impact of shifts in global trade policies could weigh on the domestic manufacturing and trade-related services sectors,” MAS wrote.
Unlike other central banks that tweak their domestic lending rates, MAS alters the exchange rate settings of its currency.
The central bank strengthens or weakens its currency against its main trading partners, thus effectively setting the S$NEER. The exact exchange rate is not set, rather, the S$NEER can move within the set policy band, the precise levels of which are not disclosed.
