MAS seen holding policy in July on balanced growth and inflation risks

RHB kept its full-year GDP forecast for the city-state at 4% leaning toward the upside on strong exports.

Singapore's central bank is expected to keep its monetary policy stance unchanged at its July meeting, as the country's economic outlook continues to improve, according to RHB Bank.

In its last meeting, the Monetary Authority of Singapore (MAS) tightened monetary policy by slightly increasing the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band.

Barnabas Gan, group chief economist and head of market research at RHB Bank said this projection is underpinned by various factors, which include an expected robust economic outlook.

“Our in-house Hodrick Prescott Model suggests the output gap to be widening in [the first half of 2026], albeit some narrowing is still possible into the remaining part of this year,” Gan said in a new analysis. 

“This view is substantiated via recent MAS rhetoric which anticipated that a moderation in activity into 2026 could result in a narrowing output gap and elevated energy-related price pressures,” he added.

RHB kept its full-year gross domestic product growth forecast for Singapore at 4.0%, leaning toward the upside on the back of strong export and manufacturing performance. The bank noted that whilst growth remains solid, lingering uncertainties could gradually close the output gap, making a case against any further tightening of monetary policy for now.

The bank also pointed to a benign price environment as another basis for its monetary policy projection, with full-year forecasts set at 2.5% for headline and 2.0% for core.

“Whilst easing geopolitical tensions and lower crude oil prices have provided near-term relief from imported inflation pressures, risks remain given Singapore’s reliance on imported energy,” Gan said, noting that higher utility tariffs expected in July–September would likely push headline prices up in the third quarter, primarily through the Utilities & Other fuels component of the consumer price index.

Latest data from the Singapore Department of Statistics showed that core inflation held steady at 1.4% in May due to lower services inflation, which offset higher food and retail and other goods inflation

The DBS-SKBI Singapore Index of Inflation Expectations survey has found that Singaporeans expect headline inflation to reach 3.4% over the next 12 months, up from 3.3% in March.

Gan also argued that further tightening is unnecessary at this point, as the S$NEER still has sufficient room within its policy band to absorb shifts in economic conditions. The existing stance is already doing its job in keeping imported inflation pressures in check, with no need for adjustment unless those risks materially worsen, he added.

“Overall, we assess that growth and inflation risks remain broadly balanced at this juncture,” Gan said. “Taken together, these factors reinforce our expectation that the MAS is likely to maintain its current policy stance while remaining vigilant over evolving external and labour market risks”.