Singapore Tightens Currency Policy Again as Economy Beats Expectations

The Monetary Authority of Singapore tightened its monetary policy for a second consecutive quarter, slightly increasing the rate of appreciation of the Singapore dollar's nominal effective exchange rate policy band while leaving its width and centre unchanged. Unlike most central banks, Singapore manages policy through the currency rather than interest rates, allowing the local dollar to strengthen or weaken against a basket of trading-partner currencies to influence imported inflation. The calibrated move builds on a tightening in April and reflects an economy running hotter than expected: advance estimates showed gross domestic product grew 5.7% year-on-year in the second quarter, stronger than forecast, driven by robust manufacturing as global demand for semiconductors and AI-related equipment surged. On a quarter-on-quarter basis, output rose 1.1%. With growth above trend, the central bank now expects the positive output gap to widen rather than narrow, and it projects both core and headline inflation to average 1.5% to 2.5% for 2026. Officials flagged continued uncertainty, warning that a fresh spike in energy prices could push inflation higher, while a pullback in AI-related investment could weaken growth. The tightening aims to keep price pressures in check while supporting medium-term stability.