Singapore Set to Hold Policy as Economy Shows Tariff Resilience

(Bloomberg) — Singapore’s central bank will likely leave its monetary policy unchanged for the first time this year, adopting a wait-and-see approach as policymakers gauge looming US tariffs that risk weighing on growth.

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Fourteen of 19 economists in a Bloomberg survey forecast the Monetary Authority of Singapore, which uses the exchange rate rather than interest rates to stabilize prices, will maintain its settings on Wednesday. Five, including Goldman Sachs Group Inc. and Bank of America, expect easing to continue.

The MAS loosened policy in January for the first time in five years, and again in April as the case to support the economy became stronger, following US President Donald Trump’s tariff threats and the ensuing global market ructions.

Singapore’s policy review comes ahead of the US Federal Reserve on July 31, with Chair Jerome Powell under increasing pressure from Trump to cut interest rates. The Fed is widely expected to hold steady, as it awaits clarity on the inflation impact from Trump’s tariffs, amid a wave of global cuts from Canada to the UK and Australia.

Forecasters expecting a hold cite Singapore’s economic stability, with preliminary growth estimates this month showing the city-state dodged a technical recession — defined as two consecutive quarters of contraction. The faster-than-expected growth was led by manufacturing, services export and construction.

Chua Hak Bin, economist at Maybank Securities Pte Ltd. sees the MAS leaving its settings unchanged through the rest of the year, “in view of the resilient economic outlook and benign, but stabilizing core inflation.”

By contrast, Kai Wei Ang, Asean economist for Bank of America NA, is predicting an easing though he reckons the decision will be a “close call.”

Ang compared the current situation with April 2016, when the economy was producing close to its potential and yet the MAS eased because core inflation was forecast to average below 2%.

Like in 2016, the economy’s negative output gap has narrowed but the outlook for core inflation appears to be “more benign,” Ang said. At the same time, Singapore’s real effective exchange rate is “elevated,” he said, suggesting the central bank will “instill its preemptive stance by flattening the slope in July, rather than wait till October.”

To meet its mandate of “medium-term price stability,” the MAS intervenes in the foreign exchange market to manage its currency within a range. It describes that process publicly, but only in general terms without providing specific figures or targets.

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The main components of that policy are guiding the “slope” of the dollar’s appreciation, the “center” of that slope and the “width” of the trading band it targets.

The five analysts predicting an easing on Wednesday, for instance, expect the MAS to slightly reduce the slope of its policy band for its main Singapore dollar measure – the nominal effective exchange rate, known as S$NEER.

The MAS also doesn’t have an explicit inflation target, though it has previously said that a core inflation rate of just under 2% on average “is consistent with overall price stability in the economy.” The gauge stood at 0.6% in June.

Earlier this month, MAS Managing Director Chia Der Jiun said core inflation should remain subdued with a resurgence of underlying price pressures unlikely, while noting that policymakers are alert to risks on both sides.

One major uncertainty is the impact of US tariffs, not only on Singapore’s economy but global growth as well. Singapore was hit with a proposed 10% rate, lower than its Southeast Asian neighbors. But with trade equaling about three times its GDP, it remains exposed to any sustained slowdown in global commerce.

Seven of nine economists who responded to a question about the impact of US tariffs on Singapore’s monetary policy said the MAS was more likely to ease over 2025 and 2026. The same number expect the city-state to end up with a US import levy of 10% or lower, while three expect the rate to rise.

The view among many monetary officials around the world is that Trump’s attempt to repatriate manufacturing and rewire commerce, if enduring, may be more of a danger to growth rather than posing a threat to consumer prices. As a result, a technical recession is still possible in Singapore as the effect from businesses front-running higher US tariffs fade.

“The global outlook is uncertain,” said Philip Wee of DBS Bank Ltd. “We will be looking out for hints of a third easing at the October review, given the central bank’s base case scenario for global economic activity to slow.”

–With assistance from Shinjini Datta.

Singapore Set to Hold Policy as Economy Shows Tariff Resilience

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