The Monetary Authority of Singapore (MAS) has lowered its core inflation forecast for 2025 to between 0.5% and 1%, a downward revision from the earlier projection of 1% to 2%. This marks the second consecutive cut, following a similar revision in January. According to MAS, core inflation—which excludes accommodation and private transport—fell to 0.8% in January and 0.6% in February, easing from 1.9% in Q4 2024.
Weaker consumer spending on food, beverage services, and retail goods, along with stronger government subsidies, contributed to the lower inflation. The central bank added that imported inflation should stay modest due to slowing global demand and subdued energy commodity prices. Headline inflation expectations were also lowered to 0.5% to 1.5%, from the previous range of 1.5% to 2.5%.
In its April policy statement, MAS announced a slight reduction in the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER), while maintaining its stance of “modest and gradual appreciation.” The width and mid-point of the policy band remain unchanged.
“MAS will closely monitor global and domestic economic developments, and remain vigilant to risks to inflation and growth,” the central bank said.
MAS flagged weakening prospects for global trade and GDP growth, citing the impact of recent US tariffs and retaliatory actions from other countries. It noted that “global growth is expected to weaken this year, with trade possibly moderating to a greater extent.”
The Ministry of Trade and Industry, on the same day, downgraded Singapore’s GDP growth forecast for 2025 to between 0% and 2%, from a prior estimate of 1% to 3%.
Consumer and business sentiment has also declined due to heightened trade policy uncertainty. The central bank cautioned: “A more abrupt or persistent weakening in global trade will have significant ramifications on Singapore’s trade-related sectors, and in turn, the broader economy.”
Nine out of 10 analysts surveyed by Reuters had anticipated MAS would loosen policy by adjusting the slope of the S$NEER trading band. Singapore’s monetary policy is managed via the exchange rate rather than interest rates, allowing the local dollar to fluctuate within an undisclosed band against a basket of major trading partners’ currencies. MAS has flexibility to change the slope, mid-point, or width of this band.
Before the policy easing in January, MAS had kept its stance unchanged for nearly five years.
CNA
