MAS holds rates steady, but we are not convinced the tightening cycle is over
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.
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.
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.
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.
Risks to this view
A faster-than-expected decline in energy prices or a significant drop in global demand could force the Monetary Authority of Singapore to abandon its tightening bias, invalidating the desk's call. Conversely, if inflation pressures ease more quickly than anticipated, the Monetary Authority of Singapore may signal that the cycle is indeed over. Any unexpected policy easing would likely weaken the SGD and force a reassessment of the desk's view.
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 inflation forecast and a more balanced assessment of inflation risks point to a less hawkish stance, strong growth and lingering upside inflation risks suggest the tightening cycle may not be over yet Deepali Bhargava Singapore's third-quarter GDP growth of 5.4% year-on-year underscores the economy's resilience Policy settings unchanged, Inflation forecast lowered The Monetary Authority of Singapore (MAS) left its monetary policy settings unchanged today, surprising both us and the market, which had largely anticipated a modest tightening. MAS maintained the pace of appreciation of the SGD NEER policy band at our estimated 1.25%, with no adjustments to the width of the band or its centre.
That said, the overall tone of the statement was less hawkish than expected. MAS lowered its 2026 core inflation forecast to 1.5-2.0%, from 1.5-2.5% previously projected at its July policy review, while noting that headline inflation is likely to average around 2%. Separately, Singapore's 3Q GDP growth came in stronger than expected at 5.4% year-on-year, underscoring the economy's resilience.
Looking ahead, growth is expected to remain steady, supported by robust demand for AI-related products and continued expansion in production capacity, which should sustain strong momentum in the technology sector in the near term. More balanced assessment of inflation risks While MAS reiterated that inflation risks remain tilted to the upside, it also acknowledged several factors that could help contain price pressures. Energy production and shipments from the Middle East could recover faster than expected, leading to a larger decline in energy prices.
At the same time, continued productivity gains should help moderate unit labour cost increases in the services sector. Enhanced government subsidies for healthcare and education are also expected to keep services inflation subdued in 2027. Our take We expect Singapore core inflation to average 2.0% this year, at the upper end of MAS's forecast range under our base case, which assumes oil prices moderate towards the end of the year.
While the inflation outlook has improved, we do not believe risks have disappeared. Domestic inflation could prove stickier if spillovers from the AI-driven investment cycle become broader-based, boosting demand and pushing unit labour costs higher than currently anticipated. Weather-related disruptions could also add to food price pressures.
As such, we continue to see the balance of risks to inflation as modestly tilted to the upside. On growth, MAS acknowledged downside risks, including a larger-than-expected rise in global interest rates or a sharper pullback in AI-related investment. However, it continues to expect the economy to operate with a positive output gap, suggesting that underlying demand conditions remain supportive.
This reinforces MAS's view that inflation pressures, while easing, have not been fully eliminated. Policy implications While MAS surprised markets by leaving policy unchanged, we do not view this as a dovish pivot. The combination of resilient growth, a positive output gap, and lingering upside inflation risks suggests that MAS is likely not done with tightening, and tightening in Jan is likely if the risks to inflation materialise.
SGD likely to remain firm The SGD NEER is currently trading near the top of its policy band, at around 1.6% above the midpoint of the +-2% band. As a result, the scope for further NEER appreciation appears limited. Nevertheless, we expect the Singapore dollar to continue outperforming its regional peers, supported by Singapore's resilient macroeconomic fundamentals.
Growth remains robust, with GDP expected to expand by more than 5% in 2H, while core inflation is likely to re-accelerate in 4Q, keeping concerns about underlying price pressures alive. Together with MAS's emphasis on upside inflation risks, this should preserve market expectations that further policy tightening remains a possibility should inflation surprise to the upside. As such, even though the SGD NEER is already near the upper end of the policy band, the combination of strong growth, a firm inflation outlook, and lingering tightening expectations should help keep the SGD well-supported relative to its regional peers.
Singapore Monetary policy Asia Pacific Asia ASEAN Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Deepali Bhargava Regional Head of Research, Asia-Pacific Deepali Bhargava joined ING in 2024 and is Head of Research and Chief Economist Asia-Pacific.
She has over 19 years of work experience as a macro specialist covering rates, FX and equity markets… In this article Policy settings unchanged, Inflation forecast lowered More balanced assessment of inflation risks Our take SGD likely to remain firm
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