Singapore Eases Monetary Policy Again Amid Slowing Global Trade

Singapore’s central bank, the Monetary Authority of Singapore (MAS), eased its monetary policy for the second time this year, citing a dimming global growth outlook driven by escalating U.S. tariffs and weakening trade. As widely anticipated, the MAS slightly reduced the rate of appreciation of its exchange rate-based policy tool, the S$NEER (Singapore Dollar Nominal Effective Exchange Rate), while keeping the width and mid-point of the band unchanged.

Unlike many central banks that use interest rates, MAS manages monetary policy through the exchange rate, allowing the Singapore dollar to fluctuate within a managed band. Following the decision, the local currency reversed earlier losses to trade stronger, reflecting market confidence in MAS’s move.

The central bank noted that export-driven economies like Singapore are facing declining demand and price pressures due to ongoing trade tensions. MAS warned that sustained weakness in global trade could significantly impact Singapore’s key sectors and broader economic performance.

Singapore's Ministry of Trade and Industry (MTI) revised its 2025 GDP growth forecast down to a range of 0% to 2%, from the earlier 1% to 3%, after data showed a Q1 growth of 3.8% year-on-year, slower than 5.0% in Q4 2024.

Inflation projections were also lowered. MAS now expects core inflation at 0.5% to 1.5% in 2025, down from 1% to 2%, and headline inflation at 0.5% to 1.5%, from a previous 1.5% to 2.5%.

Economists say another easing could follow if economic conditions worsen. OCBC's Selena Ling highlighted the central bank’s dovish tone, pointing to rising downside risks. Maybank’s Chua Hak Bin, while not expecting a recession, acknowledged the possibility of MAS shifting to a neutral stance later this year.