Singapore Loosens Its Monetary Policy Yet Again and Adjusts Growth Predictions

In an unexpected move, Singapore relaxed its monetary policy for the second consecutive instance, reacting to a GDP growth rate of 3.8% for the first quarter, which did not meet the anticipated figures.

This adjustment follows a similar action taken during the Monetary Authority of Singapore's (MAS) discussions in January, marking the first such move since 2020.

Announced on Monday, the MAS decided to slow down the rate of ascent for the Singapore dollar nominal effective exchange rate (S$NEER) policy band.

MAS indicated that it will sustain an approach that allows for a gradual and slight rise in the S$NEER policy band.

By modulating its currency relative to a spectrum of major trading partners, the central bank indirectly determines the S$NEER. Specific exchange rates are not fixed; rather, the S$NEER is permitted to operate within an undisclosed policy band.

Economists surveyed by Reuters had projected a quarterly GDP growth of 4.3% year-on-year, contrasting with the 5% expansion reported in the previous quarter of 2024. Consequently, the Ministry of Trade and Industry revised its GDP expectations for 2025 to a range of 0%-2%, scaling down from an earlier forecast of 1%-3%. MAS also echoed this adjustment in their projections.

Earlier this month, Singapore's Prime Minister, Lawrence Wong, addressed the ramifications of U.S. tariffs, expressing confidence that these factors would noticeably influence Singapore's growth. He stated, "There is a possibility of recession for Singapore this year, but it is not certain."

The MAS has adjusted the headline inflation expectations for 2025, reducing it to 0.5%-1.5%, from an earlier estimate of 1.5%-2.5%. Likewise, the core inflation prediction, which excludes housing and private transportation costs, was decreased to 0.5%-1.5%, from a previously anticipated range of 1%-2% observed after the meeting in January.