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MAS Tightens Exchange-Rate Policy for Second Time to Rein In Imported Inflation

The central bank raised the pace at which the trade-weighted Singapore dollar may appreciate to counter rising energy-driven import costs and to signal readiness to curb excessive exchange-rate swings.

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Overview

  • The Monetary Authority of Singapore increased the rate of appreciation of its S$NEER policy band very slightly in a July 27 policy statement, marking a second consecutive tightening after an April move.
  • MAS left the band’s width and centre unchanged while adjusting only the slope, a mechanism that lets it manage inflation by steering the trade-weighted exchange rate rather than changing interest rates.
  • The bank cited rising imported-price pressures from higher oil and gas costs tied to Middle East tensions as the main reason for the move and projected core inflation to pick up from July and remain elevated into early 2027.
  • Strong, export-led growth—including a 5.7% year-on-year rise in Q2 GDP—gave MAS scope to tighten even as expansion remains uneven across sectors, especially concentrated in AI and semiconductor exports.
  • The decision was smaller than April’s and was not widely expected by markets, and MAS said it stands ready to act further to curb excessive S$NEER volatility if imported-costs or other risks intensify.