Silicon 'AI Bomb' divides analysts on MAS policy path

Maybank signals an April slope steepening whilst RHB bets on policy stability through June.

The Monetary Authority of Singapore is keeping its policy stance steady for now, but analysts are split on how long that stability will hold as inflation risks build.

In its January policy announcement, MAS raised its core inflation forecast to 1%–2% from 0.5%–1.5%, though it noted that this range remains at or below the 2% level it has previously said is consistent with price stability. Still, the central bank cautioned that risks to both growth and inflation are tilted to the upside.

“The risks to the growth and inflation outlook are tilted to the upside at this point. Persistently stronger-than-expected GDP growth could lead to higher wage growth and boost consumer sentiment, exacerbating demand-pull inflationary pressures,” MAS said.

Barnabas Gan, group chief economist and head of market research at RHB, said Singapore’s relatively tame inflation and resilient economic backdrop suggest little imperative for a monetary policy tweak, at least in 1H26.

“With MAS keeping policy parameters unchanged, our in-house view is for the current S$NEER’s appreciation of +0.5% within a ±2.0% policy band, which, at this juncture, remains appropriate for ensuring price stability,” Gan said.

Consequently, supply shocks, including those triggered by geopolitical developments, risk lifting imported costs. MAS identified some downside risks, such as a sharp correction in global financial markets or an abrupt pullback in global AI-related investmen, whicht would induce a faster pace of easing in growth and consequently lower inflation.

In a separate contrast, Maybank said that they are broadly aligned with MAS on the trajectories for growth and inflation.

However, it sees potential for MAS slope steepening around April or July this year because of upside inflation risks from the “silicon price shock” from the AI bomb, the end of China’s exported deflation, a positive and widening output gap in Singapore, rising industrial metal prices, geopolitical shocks and aggressive global fiscal spending.

“We maintain our view for a resilient S$NEER amid strong fundamentals, a weaker USD in H1 2026 and as the market continues to build in a higher probability of an MAS tightening as their next move,” Maybank said.