Economists divided on Singapore’s next Monetary Policy move after surprise growth
Economists remain split on whether the Monetary Authority of Singapore (MAS) will ease monetary policy or maintain its current stance during its upcoming policy review scheduled for July 30. This debate follows Singapore’s unexpected 1.4% quarter-on-quarter GDP growth in Q2, which helped the city-state avoid a technical recession despite a weakening global economy.
Of 12 analysts surveyed by Reuters, six forecast a third policy easing this year to address an anticipated negative output gap. The other six expect MAS to keep policy settings unchanged for now, awaiting clearer signs of economic direction, News.Az reports, citing Reuters.
Unlike many central banks, MAS controls monetary conditions primarily through adjustments to the Singapore dollar nominal effective exchange rate (S$NEER) — a currency band relative to major trading partners — instead of traditional interest rate changes. Policy tools include changes to the slope, midpoint, and width of this band.
Earlier in 2025, MAS eased policy twice (January and April) due to concerns over the impact of U.S. tariffs on growth. However, recent strong data reflect frontloading — businesses accelerating activity ahead of tariff hikes — which may only delay a slowdown expected later this year.
Maybank economists upgraded their 2025 GDP forecast to 3.2% from 2.4% and expect MAS to hold policy steady given the improved outlook.
OCBC’s Christopher Wong supports a pause, noting that after two policy easings, MAS will likely wait to assess their impact amid ongoing tariff uncertainties.
Conversely, Barclays analysts predict MAS will further ease by flattening the S$NEER slope, warning that the recent growth boost will reverse as frontloading fades and investment uncertainties deepen.
Central banks worldwide have adopted a cautious, wait-and-see approach amid mixed economic signals. The U.S. Federal Reserve is expected to keep rates steady in its July meeting, while the European Central Bank paused rate changes after several cuts.
Singapore authorities have already signaled a slowdown in growth for the second half of 2025 as tariff-related pressures and global trade uncertainties mount. The government lowered its GDP forecast in April to a range of 0.0% to 2.0% from an earlier 1.0% to 3.0%.
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