Key Takeaways
- MAS kept its exchange-rate policy settings unchanged after tightening monetary policy in April and July.
- Singapore’s GDP grew 5.4% year-over-year in the third quarter, slowing from 6.2% in the second quarter.
- MAS lowered its 2026 core inflation forecast to 1.5%–2.0%, while projecting inflation to ease further in 2027.
- The central bank expects AI-related activity to support near-term growth before moderating in the second half of 2027.
Singapore’s central bank left monetary policy unchanged on October 14, catching markets off guard as most economists had expected another tightening. The Monetary Authority of Singapore (MAS) held its exchange-rate policy steady for the first time since making adjustments in April and July. The decision comes as inflation is expected to ease, with MAS lowering its forecast for core inflation this year to 1.5%–2.0%.
Meanwhile, Singapore’s economy grew 5.4% in the third quarter compared with a year earlier, slower than the 6.2% recorded in the previous quarter. The bank now faces a balancing act between keeping price pressures under control and supporting an economy that could lose some momentum as global demand and AI-related investment change.
MAS Holds Policy Settings As Inflation Forecasts Ease
In its October monetary policy statement, MAS said it would maintain the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band. It also left the band’s width and midpoint unchanged. The decision differed from market expectations. Before the announcement, all 10 economists surveyed by Reuters had expected MAS to tighten policy further.
Singapore uses its exchange rate as its main monetary policy tool instead of relying primarily on a benchmark interest rate. MAS manages the Singapore dollar against a basket of currencies belonging to the country’s trading partners, allowing it to move within a policy band. Adjusting the band’s rate of appreciation can influence import prices and help manage inflation. The central bank increased the pace of appreciation in April and made another, smaller adjustment in July. Both moves were intended to address inflation risks associated with higher imported costs, including energy prices. By keeping the settings unchanged in October, MAS is allowing those earlier measures more time to affect the economy.
The central bank also revised its inflation projections. Core inflation, which excludes accommodation and private road transport costs, is expected to average 1.5%–2.0% in 2026, down from the previous forecast range of 1.5%–2.5%. Overall inflation is projected to average around 2.0% this year. For 2027, MAS expects both core and overall inflation to average 1.5%–2.5%. It said price pressures should ease more noticeably from the middle of next year as imported costs decline and domestic cost increases remain subdued.
Singapore Growth Slows As AI Demand Supports Technology Activity
Singapore’s economy grew 5.4% year over year in the July-September quarter, according to advance estimates from the Ministry of Trade and Industry. The pace was slower than the revised 6.2% growth recorded in the second quarter but exceeded the 5.1% forecast in a Wall Street Journal economist poll. On a seasonally adjusted quarterly basis, GDP increased 1.1%, compared with revised growth of 1.5% in the previous quarter. The figures indicate that economic activity continued to expand, although its pace moderated. Technology-related industries benefited from global investment linked to artificial intelligence, which supported demand for semiconductors and chipmaking equipment. Construction, financial services and real estate also recorded firm activity, while some consumer-facing sectors remained weaker.
The central bank expects economic growth to remain firm in the near term before moderating as AI-related investment loses some momentum and tighter global financial conditions weigh on demand. It also warned that a sharper-than-expected decline in AI investment or higher interest rates could affect growth. Inflation risks have not disappeared. MAS said higher energy and food prices could increase import costs, while stronger AI-related activity could push domestic labour costs higher if productivity gains fail to keep pace.
The decision therefore leaves MAS with room to adjust policy if the inflation outlook changes. The bank said it would continue monitoring developments and remains prepared to respond to risks to medium-term price stability. Singapore’s government is due to announce its updated economic growth forecasts for 2026 and 2027 in November. Those projections, alongside upcoming inflation and activity data, should provide further information on whether the current policy settings remain appropriate.
