Written by Bing Hong Lok
SINGAPORE (Reuters) – Slowing inflation has left room for Singapore's central bank to ease monetary policy in January, but it may wait until later in 2025 to assess the policies of next U.S. President Donald Trump, analysts said ahead of key data next week.
November inflation data released on Monday, which may be the last inflation reading before the Monetary Authority of Singapore reviews policy next month, is expected to show the core rate holding steady at a three-year low in October at 2.1%, a Reuters poll showed. .
The Monetary Authority expected the core inflation rate to reach about 2% in the fourth quarter.
Analysts at DBS Bank expect core inflation to remain steady at 2.1% in November and average 1.8% in 2025, but said the Monetary Authority of Singapore was unlikely to ease policy in its January review.
“The Monetary Authority of Singapore will likely want to emulate the US Federal Reserve in basing monetary policy decisions on the actual policies of US President-elect Donald Trump rather than speculating about potential changes before his inauguration,” said Chua Han Teng, an economist at DBS.
Instead of using interest rates, Singapore conducts monetary policy by allowing the local dollar to appreciate or depreciate against the currencies of its major trading partners within an undisclosed range, known as the Singapore dollar nominal effective exchange rate, or S$NEER.
It can adjust the policy via three levers: slope, midpoint, and policy bandwidth.
A Monetary Authority of Singapore survey of economists released last week found that even with inflation falling, many expect a decline in January by cutting the Sudanese pound's lower exchange rate bias to about a third from half in the previous poll.
Moody's (NYSE:) Eugene Tan expects the Monetary Authority of Singapore to wait for core inflation to be below 2% for a few months before pulling back, and noted that the subsequent move will give the central bank time to see the impact of Trump's trade policies.
One of those who expect the Monetary Authority of Singapore to reduce the slide in the Singapore dollar exchange rate (S$NEER) in the January review is Maybank economist Chua Hak Bin, who expects inflation to soon fall below 2% and sees growth moderating to 2.6. % in 2025 from 3.6% in 2024. “Disruptions in global trade flows, shifting China's spare capacity to the rest of the world due to “Trump's tariffs would be a deflationary shock and a downsizing.” Import prices for Singapore.”
