SINGAPORE: The Monetary Authority of Singapore (MAS) raised inflation forecasts for 2026 and kept monetary policy unchanged for the third consecutive time on Thursday (Jan 29).
It now expects core inflation and headline inflation to be between 1 per cent and 2 per cent, up from the previous forecast of 0.5 per cent to 1.5 per cent.
Core inflation excludes accommodation and private road transport.
"The risks to the growth and inflation outlook are tilted to the upside at this point," said MAS.
Persistently stronger-than-expected economic growth could lead to higher wage growth and boost consumer sentiment, which could increase inflationary pressures.
Supply shocks, which could be triggered by geopolitical developments, could also increase imported costs.
On the other hand, if global financial markets see a sharp correction or there is a pullback in artificial intelligence-related investment, growth would ease faster, and inflation would be lower.
MAS said growth is expected to be resilient in 2026, and noted that underlying price pressures are returning closer to trend.
Hence, the central bank will maintain the prevailing rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band.
The width and level at which the band is centred will also not be changed.
"MAS is in an appropriate position to respond effectively to any risk to medium-term price stability and will continue to closely monitor economic developments amid uncertainties in the external environment," it said.
The move was in line with expectations. Out of 16 analysts polled by Reuters, 15 expected the MAS to stand pat.
Last year, MAS eased monetary policy in January and April, then kept it unchanged in July and October.
The central bank manages monetary policy by letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed band. Other countries typically manage monetary policy through interest rates.
Singapore can change the slope, mid-point and width of the band to adjust policy.
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It now expects core inflation and headline inflation to be between 1 per cent and 2 per cent, up from the previous forecast of 0.5 per cent to 1.5 per cent.
Core inflation excludes accommodation and private road transport.
"The risks to the growth and inflation outlook are tilted to the upside at this point," said MAS.
Persistently stronger-than-expected economic growth could lead to higher wage growth and boost consumer sentiment, which could increase inflationary pressures.
Supply shocks, which could be triggered by geopolitical developments, could also increase imported costs.
On the other hand, if global financial markets see a sharp correction or there is a pullback in artificial intelligence-related investment, growth would ease faster, and inflation would be lower.
MAS said growth is expected to be resilient in 2026, and noted that underlying price pressures are returning closer to trend.
Hence, the central bank will maintain the prevailing rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band.
The width and level at which the band is centred will also not be changed.
"MAS is in an appropriate position to respond effectively to any risk to medium-term price stability and will continue to closely monitor economic developments amid uncertainties in the external environment," it said.
The move was in line with expectations. Out of 16 analysts polled by Reuters, 15 expected the MAS to stand pat.
Last year, MAS eased monetary policy in January and April, then kept it unchanged in July and October.
The central bank manages monetary policy by letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed band. Other countries typically manage monetary policy through interest rates.
Singapore can change the slope, mid-point and width of the band to adjust policy.
Continue reading...