Re-centering of Singapore dollar policy band possible later in 2025, says analyst

Weak inflation and growth could push MAS to shift the currency band lower later this year.

The Monetary Authority of Singapore (MAS) could re-centre the Singapore dollar policy band downward later in 2025 if inflation and growth deteriorate further, UOB said in a note dated 28 April.

Whilst UOB’s base case remains for MAS to flatten the policy slope at the upcoming July monetary policy statement (MPS), the bank flagged that a downward re-centring could materialise if economic data weakens sharply.

Global GDP growth is now forecast between 2% and 2.5%, revised down from 3.2% previously, whilst Singapore’s core inflation is expected to average around 0.8% this year, closer to the lower end of MAS’s 0.5% to 1.5% forecast range.

Compared to the April 2016 policy easing episode, UOB noted that current conditions are arguably more negative. Although the bank still expects MAS to move to a zero per cent appreciation stance in July, it warned that a re-centring of the Singapore dollar policy band would be a “possible next step” if inflation or GDP projections are downgraded meaningfully.