Singapore holds monetary policy, defying analyst expectations
Singapore's central bank kept monetary settings unchanged on Wednesday, surprising analysts who had expected tightening. The MAS cited easing growth and inflation as the AI boom moderates, and narrowed its core inflation forecast to 1.5-2 per cent.
Singapore's central bank kept its monetary policy unchanged on Wednesday, a move that surprised analysts, as it projected economic growth and inflation would ease slightly with the artificial-intelligence boom and supply constraints moderating.
All 10 analysts polled by Reuters had expected the Monetary Authority of Singapore (MAS) to tighten policy, citing robust growth and inflation risks. The MAS said the economy should continue expanding at a firm pace in the near term before moderating as the AI cycle eases and global financial conditions tighten.
"Core inflation is projected to ease discernibly from the middle of next year, as supply-driven imported inflation slows and domestic costs stay subdued," the MAS said in a statement. OCBC economist Selena Ling said she was surprised and that the decision must have been a close call for the central bank.
The MAS maintained the prevailing rate of appreciation in its exchange rate-based policy band, known as the Singapore dollar nominal effective exchange rate (S$NEER), with no change to the band's width or centre. The central bank said the appreciating band would allow the Singapore dollar to strengthen and lean against near-term imported inflation.
The Singapore dollar held steady at 1.2802 per US dollar after the announcement. Preliminary government data released earlier on Wednesday showed the economy grew 5.4 per cent in the third quarter of 2026 year on year, while core inflation stood at 2.2 per cent in August.
The MAS narrowed its core inflation forecast to 1.5-2 per cent and headline inflation to 2 per cent, from a previous range of 1.5-2.5 per cent. Maybank economist Chua Hak Bin said rising interest rates and a K-shaped labour market would help contain wage cost pressures.
"Whether MAS tightens further remains open-ended and will depend on how energy prices and the AI-led boom evolves," Chua said. In August, the trade ministry upgraded its 2026 growth forecast to 4.5-5.5 per cent from 2.0-4.0 per cent, citing a less severe Middle East war impact and a stronger-than-expected global AI investment boom.
Singapore manages monetary policy through the S$NEER trading band rather than interest rates, adjusting the slope, mid-point and width of the band as needed.