MAS Strengthens Singapore Dollar Amid Ongoing Inflation Risks

The Monetary Authority of Singapore (MAS) has tightened its monetary policy stance for the second time this year, allowing for a stronger Singapore dollar in response to persistent inflationary pressure from higher oil and natural gas prices due to the Iran war.

According to MAS, the risk of relentless inflationary pressure is still present despite the policy tightening in April, which helped dampen inflationary pressures. The central bank expects external price pressures to persist and pass through more broadly to domestic consumer prices in the period ahead.

MAS core inflation, which excludes private transport and accommodation, is projected to step up from July and remain elevated but moderate discernibly from around mid-2027. Singapore's core inflation ticked up to 1.6 per cent in June, higher than the 1.4 per cent in May but still within the central bank's forecast range of 1.5 per cent to 2.5 per cent for this year.

Sheana Yue, a senior economist at Oxford Economics, said MAS' latest tightening reflects its focus on medium-term inflation risk rather than recent inflation outturns. Higher crude and refined fuel prices are likely to feed through into domestic fuel, freight, and imported goods costs, keeping inflation risks tilted to the upside.