The Monetary Authority of Singapore (MAS) implemented a tightening of its exchange rate policy in April by slightly increasing the slope of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) band, while keeping the width and the level at which it is centered unchanged [1]. This move makes MAS the first Asia-ex-Japan central bank to tighten policy following the Iran conflict [1].
In its policy statement, MAS raised its inflation forecasts for both headline and core inflation to 1.5-2.5%, up from the previous range of 1-2% [1]. At the same time, MAS downgraded its growth outlook, stating that GDP growth in 2026 is likely to step down from the above-trend pace expected in 2025, with the positive output gap narrowing to around zero percent [1].
The MAS highlighted the highly uncertain impact of the Middle East conflict on both growth and inflation, noting that energy supply shocks are likely to remain persistent and continue to push up input costs in the coming months and quarters [1]. According to MUFG’s Senior Currency Analyst Michael Wan, the MAS shift underpins the outlook for the Singapore Dollar, with future policy moves likely to depend on any upside or downside surprises to MAS’ inflation and output gap assessments [1].
CONCLUSION
MAS’s policy tightening and higher inflation forecasts support the Singapore Dollar, but the outlook remains clouded by uncertainties related to the Middle East conflict and persistent energy supply shocks. Future MAS actions will depend on how inflation and the output gap evolve relative to current expectations.