MAS eases monetary policy for first time since 2020

Move to favour more gradual appreciation of Sing$ as core inflation expected to be lower

- Ovais Subhani Senior Business Correspondent

Singapore's central bank eased its monetary policy stance to favour a more gradual appreciation of the Singapore dollar because it now expects core inflation in 2025 to be lower than earlier projected.

The Monetary Authority of Singapore (MAS) said on Jan 24 that it will reduce the prevailing rate of appreciation in the value of the Singapore dollar versus a basket of currencies of its major trading partners. MAS refers to this value as the Singapore dollar nominal effective exchange rate (S$Neer), or the trade-weighted exchange rate.

Even before the MAS announcement, the Singapore dollar had eased to around 1.35 against the US dollar from a 10-year high of 1.27 in October 2024, as the US dollar rallied on anticipation of slower US rate cuts. It traded at 1.351 to the US dollar, up 0.3 per cent from the previous day's close at 11.20am, after MAS' move.

Analysts said the much-anticipated MAS move is unlikely to have an immediate impact on exchange rates at the money changer or on currency markets, given that the Singdollar has already weakened in recent months. So people who are travelling abroad or who need to transmit money online should not be worried, they added.

The shift to an easier Singdollar policy indicates that MAS is at present not too worried about inflation and is prepared to allow a weaker exchange rate if Singapore's growth outlook takes a turn for the worse amid a sharp decline in global demand due to trade frictions.

Usually, a fall in a currency would make exports more competitive. But for consumers, it may make some purchases, travel and study abroad more expensive.