Economists expect MAS to tighten monetary policy again in October, though some see room for a pause

[SINGAPORE] The Monetary Authority of Singapore (MAS) is widely expected to tighten monetary policy for a third consecutive time at its upcoming policy meeting, though some economists say it could hold instead.

Several economists expect MAS to steepen the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band “very slightly” when it announces its decision on Wednesday (Oct 14).

UOB, Barclays and Bank of America (BOA) each expect a 25-basis-point increase, which would lift the slope to 1.5 per cent per annum from an estimated 1.25 per cent. Maybank and DBS also expect a slight steepening.

A bigger move in October appears unlikely. Barclays economists Brian Tan, Aastha Gudwani and Amruta Ghare said that the chance of MAS re-centring the band upwards – a more aggressive form of tightening – remains slim, as it would need more evidence of significant demand-pull inflation or import costs surging beyond energy.

MAS tightened in April for the first time since October 2022, as the Middle East conflict lifted energy prices and raised the risk of imported inflation.

It also raised its core and headline inflation forecasts for 2026 to 1.5 to 2.5 per cent, from 1 to 2 per cent.

In July, MAS tightened again, this time with a “very slight” steepening of the S$NEER policy band slope to an estimated 1.25 per cent from around 1 per cent.

Economists expect another tightening move in October as growth remains resilient, driven by artificial intelligence-led trade activity.

DBS chief economist Taimur Baig and senior economist Nathan Chow expect third-quarter growth of 5.4 per cent year on year, a slight moderation from the 5.9 per cent growth recorded in the second quarter.

The economists added that import cost pressures and robust growth favour a calibrated tightening rather than a more forceful adjustment.

Meanwhile, Barclays is forecasting a slight acceleration to 6 per cent.

Inflation the swing factor

The Barclays economists said that core inflation in the past few months has been milder than MAS expected. Core inflation was 2.2 per cent in August, up only modestly from 2 per cent in July, against the roughly 2.5 per cent they estimate MAS had anticipated for the third quarter.

They added that the apparent decoupling of core inflation from gross domestic product growth raises the question of whether positive growth surprises warrant the same degree of tightening. Thus, there is a risk that MAS pauses instead.

UOB economist Jester Koh also said that the decision is a very close call, though his base case is for another “very slight” steepening of 25 basis points.

Maybank analysts Saktiandi Supaat, Fiona Lim, Alan Lau and Shaun Lim similarly noted that MAS could hold in October and tighten later if necessary.

The analysts pointed out that the latest MAS survey of professional forecasters, conducted in August before the July and August inflation prints, showed that 45 per cent of respondents expect a steeper slope in October while 55 per cent expect no change.

BOA economists Rahul Bajoria, Kai Wei Ang, Pipat Luengnaruemitchai, Jojo Gonzales and Smriti Mehra said that recent announcements on regulated electricity and gas tariffs, as well as public transport fares, reinforce their view that the “inflation tail” warrants closer attention than the “hump”.

They are monitoring developments that could prompt further calibrated tightening in January 2027.