MAS expected to tighten policy in April amidst inflation risks

Slope increase likely as focus shifts to imported inflation and FX response, OCBS reports.

The Monetary Authority of Singapore (MAS) is expected to tighten monetary policy at its upcoming Monetary Policy Statement (MPS) on 14 April, according to OCBC Global Markets.

OCBC said it expects MAS to increase the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band, effectively allowing a faster pace of appreciation to address imported inflation pressures.

The bank added that a more aggressive “double-barrel” tightening which combines both a steeper slope and an upward re-centering of the policy band cannot be ruled out, though it would likely require MAS to assess inflation risks as persistent and broad-based.

The MPS will be released alongside first quarter (Q1) advanced GDP data and revised inflation forecasts. OCBC noted that market expectations are already tilted towards tightening, with focus likely on the policy mix and tone of the statement.

Deputy Prime Minister Gan Kim Yong, in a ministerial statement on 7 April, highlighted risks of escalation in the Middle East, including potential damage to energy infrastructure or a prolonged blockade of the Strait of Hormuz.

He warned that such developments could trigger a global energy crunch, weighing on growth while pushing up inflation.

He also noted that about 95% of Singapore’s electricity is generated from natural gas, with prices largely linked to market movements. While electricity tariffs rose 2.1% in the second quarter of 2026, this adjustment was based on earlier fuel prices, suggesting that recent increases in energy costs have yet to be fully reflected.

OCBC said Singapore’s inflation outlook is sensitive to global energy price movements due to its high reliance on imported energy. It added that higher fuel prices typically transmit quickly into domestic costs through utilities, transport, logistics, and supply chains.

The bank revised its inflation forecast higher, expecting headline and core inflation to average 2% to 3% in 2026, up from previous estimates, citing recent developments in the Middle East and related supply chain risks.

OCBC outlined four possible MAS policy options, namely maintaining the current policy stance, increasing the slope of appreciation, re-centring the policy band higher, or widening the band to accommodate volatility. It said policy combinations are also possible depending on conditions.

In its base case, OCBC expects MAS to raise the slope of the S$NEER policy band. It added that the S$NEER is already trading close to the upper end of its estimated range, reflecting expectations of policy tightening.

Historically, OCBC noted that slope adjustments tend to produce more gradual foreign exchange responses, while re-centring or combined tightening measures have had a stronger immediate impact on USD/SGD movements.

In a scenario involving both slope steepening and upward re-centring, OCBC estimated a one-off adjustment in the S$NEER band of around 150 to 200 basis points, with potential near-term downside pressure on USD/SGD, assuming stable broader US dollar conditions.

The bank said that beyond MAS policy, currency direction will continue to be influenced by global factors including US Federal Reserve policy, geopolitical developments, China’s growth trajectory, and broader risk sentiment.

OCBC maintained a medium-term view of gradual USD/SGD downside, supported by expectations of Fed easing, resilient regional growth dynamics, and potential stabilisation in geopolitical conditions.