MAS Boosts SGD with Second Consecutive Tightening Move
Mas tightened monetary policy in Singapore for the second time this year by increasing the Singapore Dollar (SGD) Nominal Effective Exchange Rate (NEER) slope, a move that should keep the SGD supported against the US Dollar. According to MUFG's Lloyd Chan, the modest but hawkish stance of the Monetary Authority of Singapore (MAS) should counterbalance global uncertainty and high US yields.
The MAS raised the rate of appreciation of the S$NEER policy band by a small amount, leaving the width and centre unchanged, a move that estimates increased the slope of S$NEER by 25bps to 1.25% per annum.
MAS is concerned about the persistence of imported inflation pressures and believes the economy remains strong enough to absorb further policy tightening. The growth backdrop in Singapore remains strong, with GDP growth of 6.3%yoy in Q1 and 5.7%yoy in Q2, and MAS now expects the positive output gap to widen in 2026.
The modest tightening is a result of domestic inflation pressures remaining contained, with unit labour cost growth moderating, productivity gains healthy, and little evidence of broad-based second-round inflation effects. The SGD remains sensitive to high US yields and any escalation in geopolitical tensions that could drive safe haven flows into the USD.