MAS Tightens Policy for Second Straight Time, Supports SGD

The Monetary Authority of Singapore (MAS) has delivered its second consecutive tightening, increasing the slope of the Singapore Dollar's Nominal Effective Exchange Rate (NEER) policy band by a modest amount.

This decision confirms that 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 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 as the economy continues to expand above trend.

Unit labour cost growth continues to moderate, productivity gains remain healthy, and there is still little evidence of broad-based second-round inflation effects. This distinction explains why the tightening was deliberately modest.

Lloyd Chan from MUFG notes that despite global uncertainty and high US yields, MAS's modest but hawkish stance should keep the SGD supported. He expects USD/SGD to trend lower over the medium term, with external US Dollar dynamics remaining the key near-term risk.