Singapore Unexpectedly Tightens Monetary Policy

(RTTNews) - The Monetary Authority of Singapore tightened its policy for the second straight time in order to cap inflationary pressures.

The central bank unexpectedly increased the rate of appreciation of the S$NEER policy band slightly. However, the extent of the increase was smaller than that in April.

There will be no change to the width of the policy band and the level at which it is centred, the bank said.

Rather than adjusting interest rates, the MAS uses the exchange rate against a basket of currencies within an undisclosed band as its monetary policy tool.

Although the policy tightening in April helped to dampen inflationary pressures, external price pressures are forecast to persist and pass through more broadly to domestic consumer prices in the period ahead.

Policymakers cautioned that renewed supply disruptions in the Middle East could cause sharp surges in oil prices. Core inflation is projected to step up from July and remain elevated but should moderate discernibly from around mid-2027, the bank noted.

For 2026 as a whole, both MAS core inflation and overall inflation are projected to average 1.5-2.5 percent.

The bank expects positive output gap to widen slightly this year, reflecting the above-trend growth outturns in the first half of the year. The overall GDP will be sustained at high levels in the near term, the bank added.