- The MAS reduced slightly the slope of its SGD NEER policy band…
- …amid faster disinflation and downside growth risks.
- The official 2025 core inflation forecast was lowered to 1-2%, with ours at 1.5%.
- Growth uncertainties have risen due to possible shifts in global trade policies.
- The MAS’s dovish rhetoric leaves scope for further easing if growth and inflation disappoint.
Below is a summary; for full report and detailed charts, please download the PDF
The Monetary Authority of Singapore (MAS) slightly reduced the slope of its SGD NEER policy band, while keeping the mid-point and width unchanged during its January 2025 review. We reckon that the MAS’s slight reduction in the appreciation pace of the SGD NEER policy band marked a modest policy recalibration. This measured recalibration that will guide a modest and gradual appreciation of the SGD NEER policy band was in response to a highly uncertain global economic landscape in 2025. The balance of risks to Singapore’s economic growth and inflation outlook has therefore shifted to the downside. The next easing will likely be in the second half of the year when the global economic landscape becomes more challenging from the anticipated trade tensions.
SGD NEER policy band is likely to ease again in the second half
Following the MAS’s decision to slightly reduce the slope of the SGD NEER policy band, we estimate that the annual appreciation pace of the band (based on our model) could moderate from 1.75% a year to 1.5%. This aligns with our 2025 forecasts for core inflation to average 1.5% (the centre of the MAS’s 1-2% forecast) and GDP growth to slow to 2.8% (the upper half of the official 1-3% forecast). We anticipate the SGD NEER to fluctuate within 0-1% above the band’s mid-point, reflecting a cautious and highly uncertain global outlook and a benign inflation outlook.
Today’s easing in the SGD NEER slope did not result in a higher USD/SGD. The SGD NEER had already adjusted by declining from the top to the mid-point of the band. USD/SGD reverted to its role as a price-taker exchange rate, declining on USD weakness driven by US President Donald Trump pushing the Fed to lower interest rates at next week’s FOMC meeting.
We maintain that USD/SGD will rise again with the greenback globally when the Trump administration starts imposing tariffs on February 1. Compared to his first term, Trump’s tariffs are broader in scope, with higher rates and a more expansive geographic focus that includes both rivals and allies. In its statement, the MAS reckoned that the disinflationary effects of weaker global demand would offset the escalating trade tensions on Singapore’s import prices. Considering the anticipated resilience of the Singapore economy in the first half of the year, the next easing will likely occur in the second half.
To read the full report, click here to Download the PDF.
Subscribe here to receive our economics & macro strategy materials.
To unsubscribe, please click here.
Topic
Explore more
E & S FlashGENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates)
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.