MAS could tighten again in 2027 as inflation risks broaden

Economists expect higher energy, food and transport costs to offset Singapore’s softer September inflation reading.

The Monetary Authority of Singapore (MAS) could tighten monetary policy again in the first half of 2027 as rising energy, food and domestic cost pressures threaten to lift inflation, according to economists.

RHB’s base case is for MAS to tighten policy “very slightly,” raising the estimated appreciation slope of the Singapore dollar nominal effective exchange rate, or S$NEER, policy band from 1.25% to 1.5%.

A steeper slope would allow the Singapore dollar to appreciate more quickly against the currencies of its major trading partners, helping to reduce imported inflation.

MAS tightened policy in April and July before leaving its settings unchanged at its October review.

RHB expects inflation risks to increase in early 2027 as elevated oil prices feed into electricity and gas tariffs, transport expenses, food prices and businesses’ operating costs.

UOB has a less aggressive base case, expecting MAS to maintain its current S$NEER settings through 2027. However, the bank said risks were increasingly tilted toward an additional tightening move at the January or April 2027 policy review.

The possibility of further tightening remains despite Singapore’s softer-than-expected September inflation figures.

Core inflation, which excludes accommodation and private transport costs, eased to 2% YoY from 2.2% in August. Headline inflation declined to 2.2% from 2.3%.

Economists cautioned that the moderation was partly driven by temporary and sector-specific factors rather than a sustained easing of underlying price pressures.

Competition among telecommunications providers pushed service prices lower, whilst temporary discounts contributed to declines in furniture, furnishings and household-appliance prices.

Nomura lowered its 2026 core inflation forecast to 1.8% from 2% following the September reading but raised its 2027 projection to 2% from 1.9%. It said underlying price pressures were broadening and core inflation had yet to peak.

UOB similarly said the September reading was less benign than the headline figure suggested.

The proportion of items in the consumer price index basket recording inflation above 2% increased to 45% in September from 43% in August and 39% in July, according to the bank.

UOB maintained its 2026 core inflation forecast at 1.7% and lowered its 2027 projection slightly to 2.1% from 2.2%.

The bank expects core inflation to peak at around 2.4% in January 2027, driven partly by higher energy and transport costs.

UOB estimated that electricity tariffs could increase by 5.5% in the first quarter of 2027 if Brent crude oil averages above US$100 per barrel through mid-December.

A 7% increase in bus and train fares scheduled for late December could provide an additional boost to inflation at the start of the year.

Food prices are another risk. RHB said adverse weather associated with El Niño could affect regional agricultural production, particularly rice and palm oil.

Singapore imports more than 90% of its food, leaving domestic prices exposed to global commodity costs, transportation expenses and supply-chain disruptions.

RHB maintained its 2026 headline and core inflation forecasts at 2.2% and 2%, respectively. UOB forecasts headline inflation of 1.9% and core inflation of 1.7%, whilst Nomura expects core inflation of 1.8%.

Although their forecasts differ, the economists broadly agreed that September’s slowdown did not eliminate the risk of renewed inflation.

Whether MAS tightens again will depend on how quickly higher energy, food and labour costs pass through to consumer prices and whether inflation begins to exceed the central bank’s expected trajectory.