Monetary Authority Of Singapore Monetary Policy Statement - January 2025

INTRODUCTION

1.   In the October 2024 Monetary Policy Statement (MPS), MAS maintained the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band, with no change to the width of the band or the level at which it was centred. Since then, the S$ has eased against the US$, amid broad-based US$ strength, but continued to appreciate against several other currencies in the S$NEER basket. The S$NEER remains within the gradually rising policy band.

Chart 1
S$ Nominal Effective Exchange Rate (S$NEER)

GROWTH BACKDROP

2.   Economic activity in Singapore’s major trading partners held steady in the last quarter of 2024. Private consumption in the advanced economies was generally resilient, while growth in Asia continued to benefit from the upturn in the global tech cycle. More broadly, growth was likely also supported by some frontloading of production and shipments in anticipation that trade frictions could intensify.

3.   In line with the resilient global economic backdrop, MTI’s Advance Estimates show that the Singapore economy grew by 0.1% on a quarter-on-quarter seasonally-adjusted basis in Q4 2024, following the 3.2% expansion a quarter ago. Overall, GDP growth in H2 last year was stronger than expected, largely due to the robust performance of the trade-related and financial services sectors.

4.   Global economic policy uncertainty has risen since the October monetary policy review, mainly reflecting expectations of increasing trade policy frictions. Concomitantly, the prospect of persistently elevated inflation has contributed to a tightening of global financial conditions. While consumer spending in the advanced economies should continue apace given still-strong wage growth amid supportive labour market conditions, manufacturing and trade activity is anticipated to normalise following a period of frontloading. All in, global growth could slow over 2025.

5.   Singapore’s GDP growth is projected to moderate over 2025. The impact of shifts in global trade policies could weigh on the domestic manufacturing and trade-related services sectors. For now, the Singapore economy is forecast to expand at a slower pace of 1.0–3.0% this year, from 4.0% in 2024, with the level of output keeping close to potential for 2025 as a whole.

INFLATION OUTLOOK

6.   MAS Core Inflation[1] stepped down by more than expected to 1.9% y-o-y in Q4 2024, from 2.7% in Q3. The seasonally adjusted three-month/three-month rate[2] of core inflation came in close to an annualised 1.0% for most of H2 2024, while core inflation excluding the impact from the GST hikes is estimated to have fallen below 1.5% y-o-y in Q4. Overall, the pace of consumer price increases has moderated across a broad range of goods and services, and core inflation is presently low and stable.

7.    MAS Core Inflation is now forecast to average 1.0–2.0% in 2025, lower than the 1.5–2.5% projected in the October 2024 MPS. Business cost- and demand-driven inflationary pressures are expected to remain contained. Singapore’s imported costs should stay moderate reflecting forecasts of global oil price declines and favourable supply conditions in key food commodity markets. While an escalation of trade frictions could be inflationary for some economies, their impact on Singapore’s import prices is likely to be offset by the disinflationary drags exerted by weaker global demand. On the domestic front, unit labour cost increases are projected to be lower this year as nominal wage growth gradually eases alongside steady productivity gains. At the same time, consumer price inflation for essential services such as public healthcare, pre-school education and public transport will be dampened by additional government subsidies.

8.   CPI-All Items inflation is forecast to average 1.5–2.5% in 2025, compared to 2.4% in 2024. Accommodation inflation is forecast to slow, partly offsetting an anticipated pickup in private transport inflation.

9.   Overall, the outlook for Singapore’s growth and thus inflation remains subject to uncertainties in the external environment.  

MONETARY POLICY

10.  Singapore’s growth momentum is expected to slow over this year, after outperforming in H2 2024. The level of output is projected to come in close to the economy’s potential for 2025 as a whole. Meanwhile, MAS Core Inflation has moderated more quickly than expected and will remain below 2% this year, reflecting the return to low and stable underlying price pressures in the economy.

11.  MAS will therefore reduce slightly the slope of the S$NEER policy band. There will be no change to the width of the policy band or the level at which it is centred. This measured adjustment is consistent with a modest and gradual appreciation path of the S$NEER policy band that will ensure medium-term price stability. MAS will closely monitor global and domestic economic developments, and remain vigilant to risks to inflation and growth.  

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1. [1] MAS Core Inflation excludes the costs of accommodation and private transport from CPI-All Items inflation.

1. [2] The seasonally adjusted three-month/three-month rate compares average price levels over three months against the preceding three months. The rate for December 2024, for instance, compares price levels in Oct–Dec 2024 against price levels in Jul–Sep 2024. This sequential measurement better captures the most recent pace of inflation in the economy.

Related:

Past Monetary Policy Decisions