FX.co ★ Singapore Loosens Monetary Settings on Weaker Growth, Soft Inflation

The Monetary Authority of Singapore (MAS) has adjusted its monetary policy for the second consecutive time, building upon January’s adjustment—the first since 2020—due to weaker-than-anticipated first-quarter GDP growth of 3.8% and a concerning global economic environment. On Monday, the central bank announced its decision to maintain a modest and gradual appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) band, albeit at a slightly reduced pace. The band’s width and center remain unaltered. In light of the dwindling external outlook, MAS highlighted that Singapore's output gap is expected to become negative. Additionally, cost pressures are projected to remain subdued, with MAS Core Inflation anticipated to stay well below 2%. The risks associated with inflation, as stated by MAS, are inclined towards the downside. Consequently, the central bank has revised its core inflation forecast for 2025 to 0.5%-1.5% from the previous 1.0%-2.0%, and its headline inflation forecast to 0.5%-1.5%, down from an earlier forecast of 1.5%-2.5%.