In response to escalating global economic risks and slowing inflation, the Monetary Authority of Singapore (MAS) has eased its monetary policy for the second time this year. The central bank also lowered its inflation outlook, indicating that the Singapore economy may face more prolonged headwinds from a global trade slowdown and weakened domestic demand.
MAS Loosens Policy Again in April 2025
The latest monetary policy statement from MAS, released on April 14, confirms a “slight reduction” in the rate of appreciation of the Singapore dollar’s nominal effective exchange rate (S$NEER). While the policy of “modest and gradual appreciation” remains in place, this marks the second consecutive easing move—following the first in January, which was the first in nearly five years. MAS retained the width and mid-point of the trading band, emphasizing a cautious but flexible approach to policy amid rising global uncertainty.
How MAS Manages Monetary Policy Through the Exchange Rate
Unlike most central banks that rely on interest rates, MAS conducts monetary policy via exchange rate management. It allows the Singapore dollar to trade within an undisclosed band and can adjust the slope (rate of appreciation), mid-point, or width of this band. April’s decision to reduce the slope aligns with expectations from most economists and reflects growing pressure from weak global demand and volatile trade conditions.
Core Inflation Forecasts Cut Again for 2025
Alongside its policy easing, MAS revised down its core inflation forecast for 2025 to 0.5% to 1.5%, down from an earlier projection of 1% to 2%. Core inflation, which excludes accommodation and private transport costs, has already dropped to 0.6% in February, from 1.9% in Q4 2024. Falling consumer demand and enhanced government subsidies have helped keep prices subdued, particularly in food services and retail sectors.
Headline Inflation Also Set to Decline
The outlook for headline inflation was also reduced significantly—from 1.5%–2.5% to 0.5%–1.5%. MAS attributes this trend to lower energy prices, subdued global demand, and stable import costs. Singapore’s open economy is highly sensitive to global trade flows, and as external inflation eases, domestic prices are expected to remain soft in the coming quarters.
Economic Growth Slows, Recession Risk Looms
The Ministry of Trade and Industry (MTI) has revised Singapore’s GDP growth forecast to 0%–2% for 2025, a sharp cut from the previous 1%–3% range. This reflects disappointing Q1 performance and a bleaker global outlook due to the ongoing US-China trade war. MAS warned that if global trade continues to weaken, it could have “significant ramifications” for Singapore’s trade-reliant sectors, such as manufacturing, electronics, and shipping.
Global Trade War Sparks Policy Caution
With the US imposing fresh tariffs and several countries retaliating, global supply chains and business sentiment have been disrupted. MAS acknowledged that consumer and business confidence has dropped, especially in major trading economies. Tightened financial conditions and volatile markets further complicate the situation, forcing Singapore’s central bank to act preemptively.
MAS Signals Readiness to Respond Further
Despite the current easing, MAS maintained that it would continue to monitor economic developments and stands ready to act if inflation or growth deteriorate further. The central bank’s dual moves in January and April indicate a more responsive and dynamic policy framework, enabled by its newer practice of holding four policy meetings per year (up from two previously). This gives MAS more flexibility to navigate fast-changing global dynamics.
Conclusion
The Monetary Authority of Singapore’s April 2025 easing sends a clear message: the economic challenges facing Singapore are serious and persistent. With inflation under control and trade risks escalating, MAS is acting decisively to support the economy. While a technical recession is not confirmed, the signs of economic strain are growing stronger. Businesses and consumers should brace for continued volatility, even as policymakers remain agile in their response.
