Ad Banner
Advertisement by Open Privilege
Singapore

Singapore eases monetary policy amid trade slowdown and lower inflation

Image Credits: UnsplashImage Credits: Unsplash
  • MAS adjusts the Singapore dollar's exchange rate band to support the economy amid global trade tensions and a 0.8% Q1 GDP contraction.
  • Core inflation for 2025 is revised downward to 1-2% due to easing price pressures and favorable commodity trends.
  • The SGD weakened slightly against the USD, while equities saw cautious optimism as experts debate further policy moves.

[SINGAPORE] The Monetary Authority of Singapore (MAS) has announced a modest easing of its monetary policy, adjusting the appreciation rate of the Singapore dollar nominal effective exchange rate (S$NEER) policy band. This move aims to bolster the trade-dependent nation's economy amid escalating global trade tensions, particularly those arising from recent U.S. tariff implementations.

The decision comes as regional peers, including Thailand and Malaysia, have also adopted accommodative monetary stances in response to slowing global demand. Analysts note that synchronized policy easing across Southeast Asia could help mitigate competitive currency pressures while supporting export-driven recovery. However, the MAS’s calibrated approach distinguishes Singapore’s response, prioritizing medium-term stability over aggressive stimulus.

Economic Outlook and Policy Adjustment

In the first quarter of 2025, Singapore's economy contracted by 0.8%, prompting the Ministry of Trade and Industry (MTI) to revise the annual GDP growth forecast to a range of 0% to 2%, down from the previous 1% to 3% projection. As a nation heavily reliant on international trade, Singapore is particularly susceptible to global economic fluctuations. The MAS's decision to ease monetary policy is a strategic response to mitigate the adverse effects of reduced demand and tighter global financial conditions.

Notably, the manufacturing sector, which accounts for over 20% of Singapore’s GDP, has been disproportionately impacted by supply chain disruptions and weaker electronics demand. Recent data shows a 3.2% year-on-year decline in manufacturing output, reinforcing the need for policy support. The MAS’s move is expected to provide some relief to exporters by preventing excessive currency appreciation, though its impact may be limited without a broader recovery in key markets like China and the Eurozone.

Inflation Projections

Concurrently, the MAS has updated its inflation forecasts for 2025, anticipating core inflation to average between 1% and 2%, a decrease from the earlier estimate of 1.5% to 2.5%. This adjustment reflects a faster-than-expected moderation in core inflation, attributed to easing domestic price pressures and favorable global commodity trends.

The decline in energy prices, driven by increased shale production in the U.S. and weaker global demand, has played a significant role in curbing inflationary pressures. Additionally, subdued wage growth and softer retail spending have contributed to the disinflationary trend. While lower inflation provides room for monetary easing, policymakers remain vigilant against potential upside risks, such as renewed supply shocks or geopolitical disruptions to commodity flows.

Market Reactions

Following the policy announcement, the Singapore dollar experienced a brief dip against the U.S. dollar, trading at approximately 1.3556 SGD/USD. However, the Straits Times Index saw a marginal uptick, indicating a mixed but cautiously optimistic market response.

Expert Insights

Economists suggest that while the MAS's cautious approach to policy easing provides short-term relief, further adjustments may be necessary if global trade tensions persist and domestic growth remains subdued. The central bank's emphasis on maintaining policy flexibility underscores its commitment to navigating the uncertainties of the current global economic landscape.

Some analysts have pointed to the potential for fiscal measures to complement monetary easing, particularly in targeted support for vulnerable sectors like maritime services and tourism. With the upcoming 2025 budget announcement, observers are watching for signs of coordinated fiscal-monetary strategies to reinforce Singapore’s economic resilience.

As Singapore grapples with external economic challenges, the MAS's recent policy adjustments highlight the delicate balance central banks must maintain between fostering economic growth and controlling inflation. The effectiveness of these measures will depend on both domestic economic indicators and the evolving dynamics of international trade relationships.


Ad Banner
Advertisement by Open Privilege

Read More

Economy Singapore
Image Credits: Unsplash
EconomyMay 9, 2025 at 5:30:00 PM

Indonesia shifts fuel imports from Singapore to US amid tariff negotiations

[WORLD] Indonesia is preparing to reroute a portion of its fuel imports from Singapore to the United States as part of broader negotiations...

In Trend Singapore
Image Credits: Unsplash
In TrendMay 9, 2025 at 4:00:00 PM

Positive prospects in May 2025 for the Snake month

[WORLD] As May 2025 arrives, Chinese astrology places us in the month of the Snake, a time traditionally associated with wisdom, stealth, and...

In Trend Singapore
Image Credits: Unsplash
In TrendMay 9, 2025 at 3:30:00 PM

All you need to know about ginger

[WORLD] From ancient medicine to modern kitchens, ginger (Zingiber officinale) has been cherished for its distinctive flavor and myriad health benefits. This article...

Economy Singapore
Image Credits: Unsplash
EconomyMay 9, 2025 at 1:30:00 PM

Pope Leo XIV holds first Mass

[WORLD] Pope Leo XIV, formerly Cardinal Robert Francis Prevost, celebrated his inaugural Mass as the 267th leader of the Roman Catholic Church today,...

Tech Singapore
Image Credits: Unsplash
TechMay 9, 2025 at 1:00:00 PM

China’s U.S. exports tumble as tariffs escalate

[WORLD] China's exports to the United States experienced a significant downturn in April 2025, plummeting by 21% year-on-year. This sharp decline follows the...

Leadership Singapore
Image Credits: Unsplash
LeadershipMay 9, 2025 at 1:00:00 PM

Manager-employee disconnect undermines workplace morale

[WORLD] A growing number of managers report a more negative outlook on their teams' performance and overall morale than their employees themselves. This...

Finance Singapore
Image Credits: Unsplash
FinanceMay 9, 2025 at 12:00:00 PM

Bursa Malaysia rises on banking and AI sector optimism

[MALAYSIA] Bursa Malaysia rebounded at the opening bell on Thursday, recovering from the previous session’s losses, driven by renewed buying interest in select...

Economy Singapore
Image Credits: Unsplash
EconomyMay 9, 2025 at 12:00:00 PM

Trump optimistic about US-China trade talks

[WORLD] US President Donald Trump stated yesterday that he expects meaningful trade discussions between the US and China to take place this weekend,...

Finance Singapore
Image Credits: Unsplash
FinanceMay 9, 2025 at 10:30:00 AM

Bank Negara signals policy shift

[MALAYSIA]

Finance Singapore
Image Credits: Open Privilege
FinanceMay 9, 2025 at 10:00:00 AM

Ringgit rises on trade optimism amid US dollar strength

[MALAYSIA] The ringgit opened stronger against the US dollar today, buoyed by improved market sentiment stemming from recent developments in global trade tariffs...

Politics Singapore
Image Credits: Unsplash
PoliticsMay 9, 2025 at 10:00:00 AM

The unraveling of the Western world order

[UNITED STATES] The West stands at a pivotal moment in history. The trajectories of civilizations—rising, falling, and evolving—are often shaped by the choices...

Politics Singapore
Image Credits: Unsplash
PoliticsMay 9, 2025 at 10:00:00 AM

Hong Kong must become aware of the perils of US port and maritime concerns

[WORLD] As U.S. President Donald Trump escalates tariffs on Chinese imports, concerns of a deepening trade war cast a shadow over the global...

Ad Banner
Advertisement by Open Privilege
Load More
Ad Banner
Advertisement by Open Privilege