Singapore on Friday eased monetary policy for the first time since 2020, citing a faster-than-expected fall in inflation and warning of slower growth.

The Monetary Authority of Singapore said it would slightly lower the slope of its exchange rate policy band, known as the Singapore dollar nominal effective exchange rate (S$NEER).

In its release, Singapore’s growth momentum is expected to slow this year, with core inflation “decelerating faster than expected,” the Monetary Authority said.

It added that inflation would remain below 2% this year, “reflecting a return to low and stable underlying price pressures in the economy”.

Headline inflation is expected to average 1.5%–2.5% in 2025, compared with 2.4% in 2024.

MAS also cut its average forecast for core inflation (which excludes accommodation and private transport prices) to 1%–2% in 2025, down from its forecast of 1.5%–2.5%. Monetary policy will be released in October 2024.

Singapore’s GDP growth is expected to increase by 1%-3% in 2025, down from 4% in 2024.

“The impact of shifts in global trade policy is likely to put pressure on domestic manufacturing and trade-related services,” the MAS wrote.

Unlike other central banks that adjust domestic lending rates, the HKMA changes its currency’s exchange rate settings.

The central bank appreciates or depreciates the currencies of its major trading partners, effectively setting the nominal effective exchange rate of the Singapore dollar. The exact exchange rate has not yet been determined, and the effective Singapore dollar exchange rate can move within a set policy band, but the specific level is not disclosed.