Singapore's central bank eases policy for the first time in 4 years, cuts inflation forecast

Singapore's central bank eases policy for the first time in 4 years since the Covid era, cutting inflation and economic forecasts for 2568

On January 24, 2568, Nikkei Asia reported that Monetary Authority of Singapore (MAS) Easing monetary policy for the first time in more than four years since March 4

Unlike most central banks that focus on interest rates, MAS manages monetary policy through its exchange rate, which allows the Singapore dollar to move against the currencies of its major trading partners to maintain price stability.

MAS specify that Singapore's import costs are likely to remain moderate, given expected lower global oil prices and favorable supply conditions in key food markets. Although escalating trade tensions could push up inflation in some countries, MAS believes weaker global demand will offset any impact on Singapore's import prices.

MAS has announced that the slope of the Singapore dollar's NEER policy band will ease slightly.

incidentally NEER (Singpore Dollar Nominal Effective Exchange Rate) It is the Singapore dollar's exchange rate policy, which determines the slope, width and midpoint of the currency.

Economists are divided on their forecasts, with six of 6 economists in a Reuters poll expecting the central bank to ease policy due to slower inflation and stronger-than-expected growth in 12, while six analysts expect policy to remain unchanged.

The last time MAS eased policy was in 2563 to support the economy during the Covid-19 pandemic. But since then, between October 2564 and October 2565, MAS tightened policy five times and has maintained a hawkish stance ever since.

In October 2567, MAS forecast core inflation for 2568 at 1.5% to 2.5%, but MAS has now revised down its forecast to an average of 1.0% to 2.0% in 2568, down from 2.7% in 2567 and 4.2% in 2566.

Singapore also projects its economy to grow by 1% to 3% in 2568, slowing from a 4% expansion in 2567 due to the return of US President Donald Trump and his plans for possible tariffs that could weigh on global trade.

Although Singapore's economy is set to recover strongly in 2567, the trade-dependent economy remains vulnerable to a global economic slowdown and trade disruptions caused by higher tariffs and policy uncertainty.

Both Mr. Lloyd Chan, Senior Currency Analyst at MUFG Bank said MAS is unlikely to take swift easing measures this year and will likely take a cautious approach, keeping a close eye on Trump’s tariff policy until there is more clarity before making further decisions.

refer : asia.nikkei.com

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