The Monetary Authority of Singapore (MAS) has unexpectedly tightened its policy stance at its Oct 14 half yearly review following an accumulation in external and domestic cost pressures.

What this means is that the central bank has moved to “raise slightly the slope” of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) policy band up from a flat or zero percent slope previously.

At the same time, the slope of the band – which indicates its rate of appreciation – and mid-point will be left unchanged.

The last time these parameters were tweaked was in March 2020, to help tide the economy through the downturn brought upon by the pandemic.

Market watchers had mostly expected MAS policy normalisation to begin in Apr 2022, despite while some warned that inflation pressures could push the central bank into an earlier tightening.

The latest policy move serves to “ensure price stability over the medium term while recognising the risks to the economic recovery,” MAS explains in its policy statement.

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This comes amid expectations for core inflation to stay “close to 2% in the medium term”.


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The metric – which gauges price increments to sectors other than accommodation and private transport  - rose to 1.1% y-o-y between July and August, from 0.7% in 2Q2021.

This follows an increase in global commodity prices in recent months which have been passed on through electricity & gas tariffs and non-cooked food inflation. Higher wage costs also fed inflation in domestic consumer items such as food & beverage services.

Going forward, core inflation is pencilled to come in near the upper end of the 0% to 1% forecast for 2021, before rising further to between 1% and 2% next year.

Meanwhile, headline, or all-items inflation - which measures the total level of inflation in the economy – is tipped to come in around 2% in 2021, before averaging at 1.5% to 2.5% next year.

A key reason for this is that private transport inflation is likely to moderate in 2022 against a slower pace of increase in Certificate of Entitlement (COE) premiums and petrol costs. However, accommodation inflation is expected to remain firm amid construction delays, MAS cautions.

MAS’ latest policy stance follows the 6.5% y-o-y growth in Singapore’s economy in the third quarter of the year

It is expecting the republic to log a growth rate 6% to 7% this year, barring a setback in the global economy.


See: Singapore's GDP up by 6.5% in 3Q2021: MTI advance estimates


“The Singapore economy should remain broadly on an expansion path,” the central bank says, adding that the pace of growth in 2022 will be slower but still above trend.

Against this backdrop it notes that the “the slack in the labour market should continue to be absorbed and the negative output gap close in 2022”.

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