SINGAPORE: Singapore’s monetary policy tightened unexpectedly on July 27, as the Monetary Authority of Singapore raised the appreciation rate of its exchange rate band to contain persistent inflation risks.
MAS said it would increase the appreciation rate of the Singapore dollar nominal effective exchange rate policy band “very slightly.”
The adjustment was smaller than April’s tightening, while the band’s width and centre remained unchanged.
The decision defied market expectations. Twelve of 16 analysts surveyed by Reuters had predicted no change, while four anticipated tightening, according to the Reuters report.
The Singapore dollar firmed slightly to S$1.2888 per US dollar after the announcement. MAS manages monetary policy through the exchange rate rather than a benchmark interest rate.
The central bank retained its 2026 forecasts for core and headline inflation at 1.5% to 2.5%. However, it expects core inflation to rise from July and remain elevated into early 2027 before moderating from around mid-year.
Singapore’s economy grew 5.7% year on year during the second quarter, according to preliminary Ministry of Trade and Industry data.
MAS expects AI-related investment, construction projects and financial-sector credit growth to support economic activity.
Read: SBP Policy Rate Remains at 11.5% Amid Inflation Risks
However, MAS warned that depleted fuel reserves and renewed Middle East supply disruptions could push energy prices higher. Adverse weather in food-supplying countries could also raise agricultural import costs, CNA reported.
Maybank economist Chua Hak Bin said MAS may be acting ahead of inflation pressure from energy prices and supply disruptions.
