The Monetary Authority of Singapore (MAS) kept its monetary policy unchanged on Monday, resisting pressure to tighten even as it raised its inflation projections. The central bank said the current stance — a modest and gradual appreciation of the Singapore dollar — remains appropriate for a trade-dependent economy facing higher price pressures.
Policy unchanged amid price pressures
The MAS manages the exchange rate rather than interest rates, letting the Singapore dollar move within an undisclosed band. By holding the slope, width and level of that band steady, the central bank is betting that the current pace of appreciation will be enough to cool imported inflation without choking off growth.
In its quarterly statement, the MAS noted that core inflation — which excludes private road transport and accommodation costs — has been rising faster than expected. The central bank now sees core inflation averaging between 2.5% and 3.5% this year, up from its previous forecast of 2% to 3%. Headline inflation is also expected to climb, with the forecast range raised to 3% to 4% from 2.5% to 3.5%.
Inflation outlook climbs
The upward revision reflects higher costs for services, food and electricity, as well as the lingering effects of a tight labor market. The MAS said that while global supply chain pressures have eased, domestic factors — including wage growth and business costs — are keeping inflation elevated.
“The current monetary policy stance is assessed to be appropriate for ensuring medium-term price stability while supporting sustainable growth,” the central bank said in its statement. It added that the risks to inflation are “skewed to the upside,” meaning further increases are possible if global commodity prices spike or domestic demand remains strong.
Balancing growth and stability
Singapore’s economy is heavily reliant on trade, making it sensitive to global demand and currency fluctuations. The MAS’s policy aims to keep the Singapore dollar strong enough to tame import prices but not so strong that it hurts export competitiveness.
Gross domestic product grew 2.7% in the first quarter from a year earlier, the government reported last month, slightly below the 3% pace many economists had expected. The MAS maintained its 2025 growth forecast of 2% to 3%, suggesting the economy is still on track despite the inflation headwinds.
Some analysts had expected the central bank to tighten policy — either by steepening the slope of the Singapore dollar’s appreciation or re-centering the band — given the persistent price pressures. But the MAS chose to wait, likely concerned that a stronger currency could hurt the recovery in manufacturing and tourism.
The decision leaves the central bank in a holding pattern. Its next scheduled policy review is in October, by which time more data on global inflation, U.S. interest rates and China’s economic trajectory will be available. For now, the MAS is betting that its current stance will keep inflation in check without derailing growth. Whether that bet pays off will depend on how quickly domestic price pressures ease — and whether the global economy cooperates.
