MAS tipped to tighten policy further as core inflation hits 2.2%

Analyst views vary on the size of the potential move.

The Monetary Authority of Singapore (MAS) is projected to tighten monetary policy further in October as core inflation rose to 2.2% in August, although analyst views differ on the size of the potential move.

Nomura expects MAS to increase the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band by 50 basis points (bp), barring a significant external shock.

“We believe the likelihood of another increase in the S$NEER appreciation slope is around 70%,” the brokerage said.

Developments in the artificial intelligence and technology sectors, as well as global financial conditions, will likely shape the authority's October policy decision, Nomura added.

MAS last tightened monetary policy in July, when it raised the rate of appreciation of the Singapore dollar policy band by 25 basis points.

UOB forecasts a smaller 25bp increase in October, which would take the S$NEER slope to 1.5% per annum.

“Upstream cost pressures have intensified,” the bank said, adding that imported inflation remains elevated amidst higher energy prices.

It also said broader price pressures in July and August showed that the energy price shock's impact on consumer prices was “delayed rather than derailed.”

RHB also expects Singapore to raise the S$NEER appreciation gradient to 1.50%, but the case for another tightening has weakened.

The bank said MAS could leave its policy parameters unchanged in October if inflation remains manageable. It forecasts headline and core inflation at 2.2% and 2.0%, respectively, for 2026.

CGS International similarly expects tightening, without specifying the size of the potential adjustment.

It identified elevated global energy prices as the main near-term upside risk to inflation, with higher oil and gas prices potentially lifting electricity tariffs, fuel costs and transport prices.

“We also remain cautious on food prices, particularly if adverse weather, including potential El Niño conditions, disrupts crop production amongst Singapore’s key food-importing partners and raises imported food costs,” CGSI added.

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