Singapore tightens monetary policy "slightly" to curb medium-term inflation risks

Kuala Lumpur, July 27 (KUNA) -- The Monetary Authority of Singapore (MAS) announced today, Monday, that it would tighten its monetary policy “to a modest extent” by raising the rate of appreciation of the nominal effective exchange rate (NEER) band for the Singapore dollar, citing persistent medium-term inflation risks.

The Singapore newspaper Business Times reported that MAS stated that improving growth prospects and accumulating medium-term inflationary risks necessitate further monetary tightening, despite recent inflation data remaining at moderate levels. The authority clarified that the new increase in the appreciation rate of the exchange rate band was smaller than the adjustment made at its meeting in April last year, while keeping the width of the band and its central level unchanged.

MAS said, “This considered adjustment in the monetary policy stance builds on the tightening implemented in April last year,” adding that it maintains an appropriate path for the appreciation of the Singapore dollar’s NEER band, thereby helping to mitigate inflationary pressures.

The authority had previously tightened its monetary policy in April last year by increasing the appreciation rate of the Singapore dollar’s NEER band in response to the crisis in the Middle East and the resulting sharp rise in oil prices. The April move marked the first monetary policy tightening in Singapore since October 2022.

Regarding economic performance, preliminary estimates released by the Singapore Ministry of Trade and Industry showed that gross domestic product (GDP) grew by 5.7 percent year-on-year in the second quarter of 2026. GDP rose by 1.1 percent quarter-on-quarter, seasonally adjusted, following a 1.3 percent growth in the first quarter, after the previous figure was revised upward.

MAS noted that disruptions in raw material supplies affected activity within a limited segment of oil-related sectors, but strong growth in technology-related sectors more than offset this impact. It added that most other major economic sectors recorded growth consistent with their usual trends.

The authority forecast that the Singapore economy would continue to grow strongly in the second half of the year, supported by global capital expenditure related to artificial intelligence, a robust pipeline of construction projects, and continued expansion of the financial sector driven by credit growth. It stated that the positive output gap is expected to widen slightly in 2026, indicating that actual demand in the economy remains above its estimated productive capacity. (End)