MAS eases monetary policy slightly

MAS core inflation dropped to 0.7% YoY in January–February 2025.

The Monetary Authority of Singapore (MAS) has slightly reduced the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band. The width and centre of the band remain unchanged.

Since the beginning of the year, the S$NEER has fluctuated within the upper half of the policy band, reflecting changing macroeconomic conditions and global trade policy shocks. Despite the volatility, the average S$NEER level over the past three months remained broadly stable compared to the previous quarter.

The Ministry of Trade and Industry (MTI) reported that the economy expanded by 3.8% year-on-year in Q1 2025. However, on a quarter-on-quarter seasonally adjusted basis, GDP contracted by 0.8%, reversing the 0.5% growth in the previous quarter. Export-oriented sectors, such as manufacturing and modern services, recorded weaker activity, whilst domestic-facing sectors also saw tepid performance.

In early April, the United States imposed sweeping tariffs on imports from numerous countries, many of which have announced retaliatory measures. These developments are expected to raise costs, reduce global demand, and disrupt trade flows, posing widespread risks to production and investment.

Singapore’s 2025 GDP growth is now expected to slow to 0.0–2.0%, down from 4.4% in 2024. Trade-dependent sectors are likely to be hit hardest, with possible spillovers into the domestic economy.

MAS Core Inflation dropped to 0.7% year-on-year in January–February 2025, down from 1.9% in Q4 2024. Weaker spending, lower cost pressures, and government subsidies drove prices down more than expected. The CPI re-basing in January had a minimal effect.

MAS now expects Core Inflation to average 0.5–1.5% in 2025, revised from 1.0–2.0%. Headline inflation (CPI-All Items) is also forecast at 0.5–1.5%, down from 1.5–2.5%.

Given the deteriorating global outlook, Singapore’s output gap is projected to turn negative. Both imported and domestic cost pressures are expected to remain low, keeping MAS Core Inflation well below 2%. Risks to inflation are skewed to the downside.

In response, MAS will maintain its current monetary policy stance of a modest and gradual appreciation of the S$NEER, but with a slightly reduced rate of appreciation.

With the external outlook worsening and inflation pressures easing, MAS expects the output gap to turn negative. Inflation risks are tilted to the downside.
MAS will maintain its policy of a modest and gradual appreciation of the S$NEER, but at a slower pace. It will continue monitoring economic conditions closely.

MAS stated that it will continue to monitor economic developments closely and stands ready to act in response to evolving risks to inflation and growth.