Singapore Central Bank Looses Monetary Policy amid Inflation Slowdown

The Monetary Authority of Singapore (MAS) has eased its monetary policy for the first time in almost five years, signaling expectations of continued moderation in price pressures and slowing growth momentum.

Key Changes:

* Reduced the slope of the SGD exchange rate policy band slightly
* Maintained the width and center of the policy band

Inflation Forecast:

* Revised core inflation forecast to average 1%-2% in 2025, down from 1.5%-2.5% previously
* Core inflation moderated more rapidly than expected and will remain below 2% this year

Economic Outlook:

* Singapore's economy is projected to grow by 1%-3% in 2025, slower than the 4% expansion in 2024
* Imported costs and local prices are expected to remain subdued

Impact on SGD:

* Singapore dollar weakened 0.1% against the US dollar to 1.3558 following the policy decision

Market Reaction:

* Economists believe the MAS is more confident in disinflation and no longer views inflation risks as "two-way"
* The central bank's dovish decision suggests the window for further easing remains open, but there is no urgency for immediate action

Background:

* The MAS had tightened monetary policy five times since October 2021
* Core inflation in Singapore cooled to below 2% in the last two months of 2024
* The previous monetary easing measure by the MAS was in March 2020 during the pandemic

Global Context:

* Central banks worldwide are monitoring potential impacts of proposed US tariffs
* The Bank of Japan is expected to raise interest rates on the same day as Singapore's monetary policy move
* The Federal Reserve will hold its first policy meeting of the year next week, with uncertainty over the pace of future easing