Mixed views on MAS policy for 1H25 as Singapore faces inflation and growth risks

In Q3, the economy grew faster at 4.1% YoY.

Economists are mixed about whether the Monetary Authority of Singapore (MAS) will adjust its policy settings in the first half of 2025.

According to RHB, MAS will likely keep its policy parameters unchanged at least into 1H25, adding that current S$NEER policy parameters are appropriate for maintaining Singapore's price pressures. 

Additionally, RHB expects headline and core inflation pressures at 2.3% and 1.8%, respectively, suggesting g little impetus for monetary policy to move anytime soon.

RHB, however, warned of three risks: geopolitical tensions that could cause unexpected supply chain disruptions, the potential rise in developed market protectionist policies that could limit free trade, and risks from China, especially if recent policies fail to stop the decline in property prices, which could impact Singapore’s growth outlook in 2025.

Despite these risks, RHB said MAS will have little need to tweak its policy parameters into 1H25 if its base case assumptions play out.

UOB, however, said MAS might need to slightly reduce the S$NEER slope by 50 basis points in its January or April 2025 Monetary Policy Statement (MPS), citing persistent demand-side inflation risks due to strengthening economic activity and the possible closing or even turning positive of the output gap in the second half of 2024.

Based on advance estimates, Singapore's economy grew faster at 4.1% YoY in Q3.

"We see this as a step towards restoring monetary policy neutrality, aligning with trend growth and year-on-year core inflation returning to around 1.8%, where the neutral path of the S$NEER is consistent with a moderate rate of appreciation," UOB explained.

After that, UOB does not expect any further adjustments to the S$NEER slope for the rest of 2025.