MAS tightens monetary policy as inflation outlook lifted to 2.5% cap

The Singapore dollar is set to appreciate faster to help curb rising price pressures.

The Monetary Authority of Singapore (MAS) has tightened monetary policy by slightly increasing the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band.

There was no change to the band’s width or the level at which it is centred, the authority said.

The move comes as inflation is expected to rise in the coming months following a sharp increase in global energy prices linked to disruptions in shipping through the Strait of Hormuz.

MAS raised its 2026 forecasts for both core inflation and CPI-all items inflation to 1.5–2.5%, from 1.0–2.0% previously.

For the non-core items, private transport inflation will come in higher due to the hike in fuel prices.

“However, this will be offset to some extent by subdued accommodation inflation amidst weaker housing rental growth over the past year,” it said.

Meanwhile, advance estimates from MTI show that the economy expanded expanded 4.6% year-on-year in the first quarter. However, it contracted 0.3% on a quarter-on-quarter seasonally adjusted basis following strong growth in late 2025.

MAS said growth for 2026 is likely to slow from the above-trend pace recorded in 2025, citing weaker external demand and higher input costs. “These will exert drags on value-added in energy-dependent industries such as petrochemicals and transport.”

“Nevertheless, continued global AI-related capex spending as well as resilient regional electronics production should sustain activity in Singapore’s technology-related sectors,” it added.

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