MUFG’s Senior Currency Analyst Michael Wan notes that the Monetary Authority of Singapore (MAS) tightened its exchange rate policy in April by slightly increasing the slope of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) band, becoming the first Asia-ex-Japan central bank to tighten policy after the Iran conflict. MAS raised both headline and core inflation forecasts while downgrading its growth outlook, and MUFG highlights that future moves will hinge on inflation and output gap surprises.

MAS shift underpins Singapore Dollar outlook

"The Singapore central bank tightened its exchange rate policy in its April meeting by raising slightly the slope of its policy band, while keeping the width and level at which it is centered unchanged."

"In its policy statement, MAS raised its inflation forecasts to 1.5-2.5% from 1-2% previously for both headline and MAS core inflation, while lowered its assessment of growth."

"In particular, MAS said that GDP growth in 2026 as a whole is likely to step down from the above trend pace recorded in 2025, and that concomitantly the positive output gap will narrow to around zero percent."

"Overall, the MAS highlighted the highly uncertain impact of the Middle East conflict on both growth and inflation, even as its assessment is that energy supply shocks are likely to remain persistent in different scenarios and as such continue to push up input costs in the months and quarters ahead."

"The next move as such is likely to depend on any upside or downside surprises to MAS’ inflation and output gap assessments."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)