Author: Xinghui Kok
SINGAPORE (Reuters) – Economists are divided on whether Singapore’s central bank will ease monetary policy this week or leave its stance unchanged and wait to see what policies U.S. President Donald Trump introduces in his second term.
Reuters polled 12 analysts and six expect the Monetary Authority of Singapore to loosen its currency-based monetary policy at a planned review on Friday to reflect lower inflation and stronger-than-expected economic growth in 2024.
The other six expected no change in policy settings.
The MAS has not changed policy since the tightening in October 2022, which was the fifth in a row, as broader concerns about growth kept authorities on the sidelines.
It last eased policy in March 2020 as Singapore braced for recession as COVID-19 spread around the world.
The MAS “may want to assess the implications of the Trump administration’s policies, which may not become clear until the second quarter,” said Jonathan Koh, Asia economist Standard Chartered bank (LON:), which expects the institution to stand still this week.
Lee Yen Nee, risk analyst at Fitch Solutions BMI, said Singapore’s economy gives MAS room to wait and more thoroughly assess the global environment.
Central banks at the global level are leaning toward gradual and cautious cuts in monetary policy.
The Federal Reserve cut rates in December, but a Reuters poll expects it to keep policy on hold this month as Trump’s policies fuel inflation concerns.
The European Central Bank said further cuts were likely, but a cautious approach was needed due to prevailing uncertainties.
Instead of using interest rates, Singapore manages monetary policy by allowing the local dollar to rise or fall against the currencies of its major trading partners within an unpublished trading range, known as the Singapore dollar nominal effective exchange rate, or S$NEER.
It adjusts the policy through three levers: the slope, the midpoint and the policy bandwidth.
Maybank economist Chua Hak Bin sees room for the central bank to ease policy “given a more benign inflation outlook”, predicting a milder appreciation on the slope of the S$NEER spread.
Chua expects core and headline inflation, now below 2% after cooling from a peak of 5.5% in early 2023, to fall further in early 2025.
The central bank expects core and headline inflation to be at 1.5% to 2.5% for this year.
Bank of America analysts expect the MAS to leave policy unchanged, but with a sharp direction, before easing at the next planned revision in April.
Last year, MAS started making policy announcements quarterly instead of semi-annually.
“By the April meeting, cost pass-through from the usual early-year price adjustments and the impact of Singapore’s budget will be clearer,” the analysts wrote.
Singapore is often seen as a leader in global growth as its international trade dwarfs the domestic economy.
Growth surprised to the upside in 2024 from 4% to previous estimates after slowing to 1.1% in 2023 from 3.8% in 2022.
The GDP growth forecast of the Ministry of Commerce for 2025 is 1.0% to 3.0%.
