MAS Relaxes Monetary Policy Settings And Cuts The 2025 Core Inflation Forecast To A Range Of 1% To 2%.

This follows the moderation of core inflation, which was 'faster than anticipated'.

On Friday (Jan 24), Singapore's central bank relaxed its monetary policy settings. It had kept the policy stable for over two years since the last tightening measure in October 2022.

The Monetary Authority of Singapore (MAS) stated that it would "slightly" decrease the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band. The width of the band and the level at its center will remain unchanged.

MAS said, "This calibrated adjustment is in line with a moderate and gradual appreciation trajectory of the S$NEER policy band, which will guarantee medium-term price stability."

This action was in accordance with market anticipations. After all, Singapore's core inflation, which excludes housing and private transportation costs, dropped below the 2-percent mark for the second consecutive month in December.

The central bank revised down its core inflation projection for 2025, forecasting an average of 1 to 2 percent. This is a decrease from the earlier prediction of 1.5 to 2.5 percent made at its October meeting.

"The moderation of core inflation has been more rapid than anticipated and will stay below 2 percent this year, indicating that the underlying price pressures in the economy have returned to a low and stable state," the MAS announced on Friday.

However, it kept its 2025 headline inflation forecast at 1.5-2.5 percent, stating, "Inflation in accommodation is expected to decelerate, partially counterbalancing an expected increase in private transport inflation."

Slower Growth

The Monetary Authority of Singapore (MAS) anticipates that Singapore's growth momentum will weaken this year, following its "above-average performance" in the second half of 2024.

It further added, "The overall output level for 2025 is projected to be close to the economy's potential."

Data released by the Singapore Department of Statistics on Thursday indicated that Singapore's full-year core inflation in 2024 averaged 2.7 per cent, which was within the official forecast range of 2.5 to 3 per cent. The full-year headline inflation stood at 2.4 per cent.

In December, core inflation decreased to 1.8 per cent from 1.9 per cent in the previous month, marking the lowest figure since November 2021. Meanwhile, headline inflation in December remained at 1.6 per cent.

Given the authorities' relatively "dovish" stance, several economists had predicted that the Monetary Authority of Singapore (MAS) would slightly reduce the slope of the S$NEER policy band after the release of December's data.