MAS holds rates steady, but we are not convinced the tightening cycle is over
At a Glance
Per the full note from ING Think, the Monetary Authority of Singapore left its monetary policy settings unchanged, surprising both the desk and the market, which had largely anticipated a modest tightening. The desk's thesis is that while a lower 2026 core inflation forecast and a more balanced assessment of inflation risks point to a less hawkish stance, the tightening cycle is not necessarily over. The Monetary Authority of Singapore maintained the SGD NEER policy band slope at an estimated 1.25%, with no changes to the band width or centre. Supporting evidence includes Singapore's third-quarter GDP growth of 5.4% year-on-year, which underscores economic resilience, and the Monetary Authority of Singapore's downward revision of the 2026 core inflation forecast to 1.5-2.0% from 1.5-2.5%. With no internal coverage on the relevant currencies and no high-impact events on the calendar for this jurisdiction in the next 30 days, the desk's view is a standalone call that challenges the market's expectation of a tightening pause.
Key Takeaways
- 01Monetary Authority of Singapore left policy unchanged, surprising market expectations of a modest tightening.
- 02Third-quarter GDP growth of 5.4% year-on-year highlights economic resilience.
- 032026 core inflation forecast lowered to 1.5-2.0% from 1.5-2.5%, but upside risks remain.
- 04The desk believes the tightening cycle may not be over, contrary to the market's less hawkish interpretation.
Full Analysis
What the desk is arguing
Per the full note from ING Think, the Monetary Authority of Singapore left policy unchanged today, a move that surprised both the desk and the market, which had largely anticipated a modest tightening. The desk frames this as a temporary pause rather than the end of the tightening cycle, citing strong growth and lingering upside inflation risks. The Monetary Authority of Singapore maintained the pace of appreciation of the SGD NEER policy band at an estimated 1.25%, with no adjustments to the width or centre.
The supporting evidence the desk leans on includes Singapore's third-quarter GDP growth of 5.4% year-on-year, which underscores the economy's resilience. Additionally, the Monetary Authority of Singapore lowered its 2026 core inflation forecast to 1.5-2.0% from 1.5-2.5% previously, while noting that headline inflation is likely to average around 2%. The desk also points to robust demand for AI-related products and continued expansion in production capacity as factors that should sustain strong momentum in the technology sector.
The alternative read would be that the Monetary Authority of Singapore's less hawkish tone, combined with a lower inflation forecast, signals that the tightening cycle is indeed over. However, the desk implicitly rejects this by highlighting that inflation risks remain tilted to the upside and that growth is expected to remain steady, suggesting that policy may need to be tightened further if inflation pressures persist.
How other firms see it
Given the lack of specific currency pairs mentioned in the source commentary, we focus on the broader implications for Asian FX and central bank policy. The desk's view aligns with a cautious stance on the Monetary Authority of Singapore's policy trajectory, which could influence other regional central banks. Watch for spillover effects in USD/SGD and USD/JPY as traders assess the Monetary Authority of Singapore's next move.
What the calendar says
No high-impact events are scheduled for this jurisdiction in the next 30 days, so the desk's call rests solely on the Monetary Authority of Singapore's policy stance and the underlying economic data. Without upcoming catalysts, the market's focus will remain on any unscheduled comments from Monetary Authority of Singapore officials or shifts in global risk sentiment.
Market Implications
Watch for SGD NEER to remain supported near the upper end of its band as the market digests the Monetary Authority of Singapore's less hawkish tone, which could weaken the SGD initially. However, if growth and inflation data continue to surprise on the upside, expect renewed expectations of tightening, potentially strengthening the SGD. Monitor USD/SGD for a test of 1.35 and USD/JPY for spillover effects from Asian FX dynamics.
From the original
Articles MAS holds rates steady, but we are not convinced the tightening cycle is over Published 08:00 Singapore Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The Monetary Authority of Singapore left policy unchanged today. While a lower 2026 inflat
Related speeches
4 itemsAsia week ahead: MAS policy review and key data in China, Japan and India
The upcoming week is pivotal, particularly with the Monetary Authority of Singapore (MAS) poised to enhance its monetary policy, reflecting robust economic fundamentals and anticipated GDP growth. Per the full note [source], the desk expects a modest tightening in the SGD nominal effective exchange rate (NEER) policy band, aiming for a 1.5% annual appreciation. This development underscores confidence in Singapore's economic resilience amidst global challenges, particularly with industrial production and electronics exports reaching new highs. Additionally, critical data from China, Japan, and India will impact market sentiment, especially concerning inflation dynamics that may influence monetary policy strategies in these regions.
Singapore inflation surprises lower, but upside risks keep MAS on tightening watch
The desk interprets Singapore's recent inflation data as an indication that the Monetary Authority of Singapore (MAS) is likely to maintain a tightening bias despite July inflation figures coming in lower than anticipated. Per the full note from ing-think, even though CPI inflation increased to 2.2% YoY, it was below the expected 2.4%, suggesting that while there are persistent upside risks, the current inflation trajectory is not as strong as some market participants had anticipated. This backdrop reinforces the October MAS meeting as a key potential tightening event as global oil prices and utility costs remain elevated, keeping the pressure on the local economy to adjust. Furthermore, ongoing geopolitical tensions could exacerbate inflationary pressures, influencing central bank decisions in the near term.