- The MAS kept the three parameters of the SGD NEER policy band unchanged during its July 2025 review.
- However, we see the door open for a third reduction in the SGD NEER policy band slope in October.
- Singapore’s GDP growth will likely slow in 2H25 amid tariff headwinds.
- Inflation will remain contained, but we are watchful of downside risks from softer demand.
- We forecast that USD/SGD will remain in a 1.25-1.30 range, resuming its decline to 1.28 by end-2025.
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SGD NEER policy unchanged in July – keeping the powder dry
The Monetary Authority of Singapore (MAS)’s decision to keep the three parameters – the slope, mid-point, and width – of the SGD NEER policy band unchanged during its July 2025 review did not come as a surprise. First, the Singapore economy averted a technical recession. Real GDP growth rebounded to 1.4% QoQ sa in 2Q25 after a 0.5% contraction in 1Q25. Some de-escalation in global trade tensions also reduced the risks of a sharp growth slowdown at least in the near-term. Second, the prevailing SGD NEER policy settings are consistent with medium-term price stability. Despite the two slight reductions in the band’s slope in January and April 2025, the SGD NEER was firm in the upper quartile of the band, according to our model, keeping the CPI-All Items and core inflation stable in the lower half of this year’s forecast range of 0.5-1.5%.
However, we see the door open for a third reduction in the band’s slope in October. The two easings in January and April were considered an unwinding of the restrictive policy settings implemented between 2021 and 2024. Despite its resilience in 1H25, the Singapore economy is expected to align with the tariff-induced slowdown in the global economy and external demand in 2H25, which will likely keep inflation subdued. Hence, we expect the SGD NEER to decline towards the mid-point of the policy band over the next three months, leading into the October review.
USD/SGD to follow broad USD weakness
USD/SGD remains a price-taker of broad-based global USD trends in 2025, falling by an unprecedented 7% to 1.27 in 1H25 before correcting higher by 1.3% to 1.29 in July. The 1.27 low in early July was just beneath last September’s 1.28 floor. We forecast that USD/SGD will remain in a 1.25-1.30 range, resuming its decline to 1.28 by the end of 2025, before falling to a new 11-year low of 1.26. Our view assumes that the US Federal Reserve would start lowering interest rates by 100 bps to 3.25-3.50% by mid-2026, barring a global recession or financial shocks. We have not ruled out USD/SGD declining further into a 1.20-1.25 range in 2026. We are closely monitoring the USD’s medium-term downside risks driven by US President Donald Trump’s threat to remove Fed Chair Jerome Powell before his term ends in May 2026, his push for significantly lower US interest rates to around 1%, and a more competitive USD to bolster his agenda of reshoring manufacturing.
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