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Singapore maintains monetary policy settings amid inflation risks

MAS said the current appreciating policy band would allow the Singapore dollar to strengthen further, helping offset the expected near-term increase in imported inflation and supporting a gradual easing of price pressures in 2027.

Singapore (VNA) – The Monetary Authority of Singapore (MAS) has maintained its monetary policy settings, allowing the Singapore dollar to continue strengthening to curb imported inflation, while warning that elevated energy prices could keep inflation high in the coming months.

MAS said it would maintain the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band.

Unlike many central banks that use interest rates as their main policy tool, MAS manages the monetary policy through the exchange rate. The S$NEER measures the Singapore dollar against a basket of currencies of the country’s major trading partners.

This approach reflects Singapore’s position as a small, open economy that relies heavily on international trade and imports. Exchange rate movements therefore have a significant influence on domestic prices.

MAS said the current appreciating policy band would allow the Singapore dollar to strengthen further, helping offset the expected near-term increase in imported inflation and supporting a gradual easing of price pressures in 2027.

The authority tightened the monetary policy twice this year, in April and July, by increasing the rate of appreciation of the policy band. The measures were aimed at containing persistent inflationary pressures linked to the conflict in the Middle East and rising import costs.

According to MAS, global energy prices have risen again since September and are expected to remain high in the near term. Global and regional food prices are also projected to increase as higher input costs and adverse weather conditions affect production.

These pressures are expected to keep core inflation and overall consumer price inflation at slightly elevated levels in the coming months.

MAS core inflation, which excludes accommodation and private transport costs from the consumer price index, rose to 2.1% year on year in July and August 2026, from 1.5% in the second quarter.

For the full year, MAS expects core inflation to average 1.5–2.0%, while overall inflation is projected at around 2.0%. However, inflation is expected to moderate over 2027 as import costs ebb and domestic price pressures stay subdued, according to MAS./.

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