SINGAPORE: DBS On MAS Outlook Into 2025

The local bank highlights two potential outlooks for MAS policy into 2025, with different consequences for the USD/SGD outlook. See below for more details. 

DBS: "We infer two possible scenarios from the statement regarding the circumstances and conditions needed to loosen the SGD NEER

policy band in 2025. A constructive scenario will slightly reduce the appreciation pace of the SGD NEER policy band on more disinflation, pushing the 2025 inflation forecast lower to a historically comfortable range. The world economy would also need to remain resilient, underpinned by a soft landing in the US economy from easing financial conditions, a more stable Chinese economy from the recent stimulus, and a sustained upswing in the electronics and trade cycles. Under the constructive scenario, which is also our base case, we see USD/SGD moving into a lower 1.25-1.30 range in 2025." 

"The second scenario, which is undesirable and driven by an abrupt downturn in the global economy, is another possibility. Past examples,

such as the 2008 Global Financial Crisis and the 2020 Covid-19 recession, have seen MAS shift to a zero-appreciation pace of the policy band and re-centred the band lower. This was in anticipation of an abrupt decline in costs and prices that materially lowered domestic

inflation. The world is awaiting the US Presidential elections on November 5 for more clarity on America’s policy directions. For

example, under a Trump 2.0 presidency, higher tariffs on China and other economies and a stronger USD from wider fiscal deficits

reigniting inflation could push USD/SGD higher towards and above 1.35."