Singapore's MAS Unexpectedly Tightens Policy for a Second Time This Year

The Monetary Authority of Singapore tightened monetary policy on Monday, surprising most analysts who had expected no change. The central bank said it would very slightly raise the rate of appreciation of the Singapore dollar nominal effective exchange rate policy band, a smaller move than its April adjustment, while keeping the band's width and centre unchanged. It was the second tightening of 2026. Rather than setting interest rates directly, Singapore manages monetary policy through the exchange rate, and steepening the band signals a stronger local dollar to help contain imported inflation. The authority said its April action had helped cool price pressures but that external costs are still filtering through to consumers, with core inflation set to pick up. Core inflation averaged 1.5% in the second quarter, up from about 1.2% early in the year before the escalation of Middle East tensions. MAS kept its 2026 inflation projections at 1.5% to 2.5% for both core and headline measures and said pressures should ease more clearly in the second half of 2027. It flagged two-sided risks, including a renewed oil-price spike and a potential pullback in AI-related investment.