SINGAPORE: MAS Eases, Reducing SGD NEER Slope Slightly

The MAS has eased monetary policy, with its policy statement noting it will slightly reduce the pace of SGD NEER appreciation. There is no change to the width of the policy band or where the SGD NEER is centered. The market consensus was for an easing, although there were some forecasters who saw no change. This was also our bias, although we noted it was a close call. 

• The MAS statement noted "Singapore’s GDP growth is projected to moderate over 2025. The impact of shifts in global trade policies could weigh on the domestic manufacturing and trade-related services sectors. For now, the Singapore economy is forecast to expand at a slower pace of 1.0–3.0% this year, from 4.0% in 2024, with the level of output keeping close to potential for 2025 as a whole."
• On inflation: "Overall, the pace of consumer price increases has moderated across a broad range of goods and services, and core inflation is presently low and stable." "MAS Core Inflation is now forecast to average 1.0–2.0% in 2025, lower than the 1.5–2.5% projected in the October 2024 MPS. Business cost- and demand-driven inflationary pressures are expected to remain contained." See the full policy statement here.
• Expectations for softer growth this year, coupled with downside inflation surprises in Q4 of last year has been enough to tip the MAS's hand into easing.
• A modest reduction in the SGD NEER appreciation may be in the 0.5-1.0% range, although only time will tell on this front. There will still be scope for further easing as we progress through 2025, although outside of a strong external shock, moves are likely to be modest.