Singapore’s central bank (MAS) is expected to keep monetary policy unchanged

Singapore’s central bank is expected to keep its monetary policy unchanged at its upcoming review on July 31. This comes amid persistent global economic uncertainty. According to a Bloomberg survey, 14 of 19 economists anticipate that the Monetary Authority of Singapore (MAS) will maintain its current policy stance. The MAS previously eased policy in January and April, marking its most accommodative position in five years. 

Singapore’s approach to its monetary policy is quite exceptional. Unlike central banks that alter interest rates, MAS uses the exchange rate as its main instrument. It conducts monetary policy by adjusting the width, midpoint, and slope of a policy band for the Singapore dollar. This way, a small and open economy like Singapore can better deal with imported inflation and external shocks.

Five economists predict more easing, including those at Goldman Sachs Group Inc. and Bank of America. They said MAS may choose to “slightly” lower the slope of its policy band to provide a little more leeway for an economy already facing external shocks.

Strong growth and stable inflation strengthen the case for MAS policy hold

One of the big reasons the markets had anticipated the hold in policy is that Singapore’s economic performance in the recent past has been quite strong.”

Earlier this month, estimates indicated Singapore skirted a technical recession. The economy expanded more than expected in Q2 2025, driven by strong growth in manufacturing, construction, and exports of services.

That has boosted economists’ confidence, with many believing the worst may be over. Chua Hak Bin, an economist at Maybank Securities, said the growth outlook appeared to have bottomed out. He noted that given the economy’s resilience and stable core inflation, their team had projected that MAS would keep policy unchanged in the second half of the year, despite lingering downside risks.

Inflation has also been tepid in Singapore, with core prices up 0.6% in June. Although MAS does not have an explicit target for inflation, it has signaled that a 2% rate is consistent with price stability. With prices stable and growth back on track, the central bank has some time before it needs to continue to act.

However, not all analysts are persuaded that standing pat is the right path. What if they’re too tight? Some say that they believe inflation expectations remain very weak and that the Singapore dollar is quite strong, so that export competitiveness could be hit further.

Global risks drive MAS’s cautious outlook

Though domestic data looks increasingly optimistic, global risks remain a major factor in Singapore’s economic prospects. The escalating trade showdown between the United States and its economic partners worldwide is on everyone’s minds.

Singapore’s trade-independent centrality to the whirling tensions of global commerce was showcased this week as US President Donald Trump proposed new import tariffs on the United States from China, and 10% of those imports could affect the trade-reliant city-state. Although that rate is lower than that endured by some of Singapore’s neighbors, it could still be a significant drag on one of the world’s most open economies.

MAS Managing Director Chia Der Jiun has publicly recognized this risk, saying earlier this month that although core inflationary pressures are still mild, policymakers must be alert to risks in both directions. He cautioned that a resurgence in global trade protectionism could damage Singapore’s export-oriented industries, such as electronics, logistics, and finance.

If global downside risks materialize, seven of nine economists, who answered a follow-up question to the survey, expect MAS to move towards easing in 2025-2026.

Central banks worldwide have been growing increasingly worried that structural changes in global trade, such as Trump’s reshoring ambitions, could slow investment and trade over the long term. If these changes persist, Singapore could be steered into renewed economic contractions, even if inflation is kept in check.

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