SINGAPORE: The Monetary Authority of Singapore (MAS) is expected to tighten monetary policy on Tuesday (Apr 14) as the Middle East conflict and energy disruption threaten to push prices higher.
According to a Bloomberg survey published on Friday, 15 of 18 economists expect the central bank to tighten policy this week. Three expect no change and none forecast easing. The survey was conducted between Mar 27 and Apr 9.
MAS has not adjusted policy since April 2025, when it eased in response to the brewing US-China trade war.
With inflation expected to accelerate alongside rising energy prices, most analysts see the central bank tightening policy at least once this year. Some also expect a second move in July or October.
Tightening means MAS is effectively allowing the Singapore dollar to appreciate, making imports cheaper and helping to keep inflation in check.
Bank of America (BofA) Securities said it expects MAS to steepen the S$NEER slope – allowing the currency to strengthen at a faster pace – a move likely to be anticipated by markets.
“We expect the policy tone to be broadly balanced, as MAS continues to weigh near-term inflation risks against medium-term growth concerns,” analysts said in a report dated Apr 8.
BofA Securities said it "leans towards" a second policy move in July, though with high uncertainty.
Even before the conflict began, some economists expected MAS to tighten policy in April.
“After the energy shocks, there is a stronger case for the MAS to move, given rising inflation risks,” HSBC analysts said in an Apr 7 report.
The bank expects tightening in April, a pause in July and another tightening in October.
"The reason why we are not anticipating a back-to-back tightening move is that the MAS will likely take the time to assess the impact before moving again," said Ms Yun Liu, senior ASEAN economist at HSBC.
Most central banks manage monetary policy through interest rates, but Singapore does so through exchange rates. MAS lets the Singapore dollar strengthen or weaken against currencies of the country's main trading partners within an undisclosed band.
It can change the slope, mid-point or width of the band.
Fifteen of the 18 economists surveyed by Bloomberg expect the slope to be made steeper.
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Recentring the mid-point higher would be the equivalent of a one-off revaluation or appreciation of the Singapore dollar. Only two economists in Bloomberg's survey expect this.
“We think recentring may be too drastic a move,” said Standard Chartered economists Edward Lee and Jonathan Koh in an Apr 1 report.
The current situation is not similar to 2022, when MAS shifted the mid-point upward three times to fight inflation as economies emerged from the COVID-19 pandemic and the Russia-Ukraine war pushed prices higher, they wrote.
“The current oil crisis poses a more complex dilemma for the MAS.”
In 2022, inflation was the dominant concern as demand recovered and prices rose, but energy supply was not disrupted.
Now, higher energy and commodity prices could erode incomes, and supply disruptions could weigh on industrial activity. There is more uncertainty about whether second-round inflation pass-through will be a concern, they said.
Economists are also expecting the central bank to raise its inflation forecast for the year.
In a written parliamentary reply on Apr 7, Deputy Prime Minister and MAS chairman Gan Kim Yong said the central bank is assessing its monetary policy stance and the inflation outlook for 2026 will be updated.
BofA Securities and HSBC believe MAS will increase its estimate from between 1 and 2 per cent to between 1.5 and 2.5 per cent – the second upgrade for the 2026 forecast after it was raised in January.
“We keep our core inflation forecast at 1.8 per cent and headline inflation forecast at 2.4 per cent for 2026,” said HSBC.
Standard Chartered raised its inflation forecast to 2.5 per cent this month, from an earlier estimate of 1.5 per cent.
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According to a Bloomberg survey published on Friday, 15 of 18 economists expect the central bank to tighten policy this week. Three expect no change and none forecast easing. The survey was conducted between Mar 27 and Apr 9.
MAS has not adjusted policy since April 2025, when it eased in response to the brewing US-China trade war.
With inflation expected to accelerate alongside rising energy prices, most analysts see the central bank tightening policy at least once this year. Some also expect a second move in July or October.
Tightening means MAS is effectively allowing the Singapore dollar to appreciate, making imports cheaper and helping to keep inflation in check.
Bank of America (BofA) Securities said it expects MAS to steepen the S$NEER slope – allowing the currency to strengthen at a faster pace – a move likely to be anticipated by markets.
“We expect the policy tone to be broadly balanced, as MAS continues to weigh near-term inflation risks against medium-term growth concerns,” analysts said in a report dated Apr 8.
BofA Securities said it "leans towards" a second policy move in July, though with high uncertainty.
Even before the conflict began, some economists expected MAS to tighten policy in April.
“After the energy shocks, there is a stronger case for the MAS to move, given rising inflation risks,” HSBC analysts said in an Apr 7 report.
The bank expects tightening in April, a pause in July and another tightening in October.
"The reason why we are not anticipating a back-to-back tightening move is that the MAS will likely take the time to assess the impact before moving again," said Ms Yun Liu, senior ASEAN economist at HSBC.
HOW MAS TIGHTENS POLICY
Most central banks manage monetary policy through interest rates, but Singapore does so through exchange rates. MAS lets the Singapore dollar strengthen or weaken against currencies of the country's main trading partners within an undisclosed band.
It can change the slope, mid-point or width of the band.
Fifteen of the 18 economists surveyed by Bloomberg expect the slope to be made steeper.
CNA Games
Show More Show Less
Related:
Recentring the mid-point higher would be the equivalent of a one-off revaluation or appreciation of the Singapore dollar. Only two economists in Bloomberg's survey expect this.
“We think recentring may be too drastic a move,” said Standard Chartered economists Edward Lee and Jonathan Koh in an Apr 1 report.
The current situation is not similar to 2022, when MAS shifted the mid-point upward three times to fight inflation as economies emerged from the COVID-19 pandemic and the Russia-Ukraine war pushed prices higher, they wrote.
“The current oil crisis poses a more complex dilemma for the MAS.”
In 2022, inflation was the dominant concern as demand recovered and prices rose, but energy supply was not disrupted.
Now, higher energy and commodity prices could erode incomes, and supply disruptions could weigh on industrial activity. There is more uncertainty about whether second-round inflation pass-through will be a concern, they said.
INFLATION FORECASTS
Economists are also expecting the central bank to raise its inflation forecast for the year.
In a written parliamentary reply on Apr 7, Deputy Prime Minister and MAS chairman Gan Kim Yong said the central bank is assessing its monetary policy stance and the inflation outlook for 2026 will be updated.
BofA Securities and HSBC believe MAS will increase its estimate from between 1 and 2 per cent to between 1.5 and 2.5 per cent – the second upgrade for the 2026 forecast after it was raised in January.
“We keep our core inflation forecast at 1.8 per cent and headline inflation forecast at 2.4 per cent for 2026,” said HSBC.
Standard Chartered raised its inflation forecast to 2.5 per cent this month, from an earlier estimate of 1.5 per cent.
Continue reading...