Key Points

• MAS slightly increased the rate of appreciation of the Singapore dollar to counter rising inflation.
• This marks the second consecutive tightening after April 2026’s macroeconomic review.
• July’s adjustment is smaller than April’s.

Inflation Outlook

• Core inflation rose to 1.5 % y‑o‑y in Q2 2026, up from 1.2 % earlier.
• Forecast: inflation to stay elevated into early 2027.
• MAS maintains its 2026 average inflation projection at 1.5–2.5 %.
• Energy, food, and retail prices expected to rise due to higher imported costs.
• El Niño‑related weather may reduce agricultural output and push food prices up.
• Inflation should ease more clearly in H2 2027 as global energy prices moderate.

Global Economic Context

• Global growth has been more resilient than expected.
• Oil and gas prices have retreated from April peaks, easing supply pressures.
• AI‑related investments continue to drive strong IT production and trade.
• Major trading partners expected to sustain growth through tech investment.
• Elevated energy costs still pose worldwide inflationary pressure.

Singapore’s Economic Performance

• Domestic growth stronger than anticipated; Q2 2026 GDP +5.7 % y‑o‑y.
• Tech‑related sectors offset oil‑sector disruptions.
• AI‑driven investments expected to keep growth firm in H2 2026.
• The new U.S. 12.5 % tariff on Singapore exports has limited impact due to diversification and electronics boom.
• Positive output gap widening, signaling above‑trend growth and potential cost pressures.

Policy Implications

• MAS tightening aims to contain inflation amid strong growth.
• Risks remain:
  • Energy price spikes could lift inflation further.
  • A slowdown in AI investment or tighter financial conditions could weaken growth.
• MAS affirms readiness to respond to risks and safeguard medium‑term price stability.

Summary
MAS’s measured tightening reflects confidence in Singapore’s resilient economy while guarding against persistent inflation. The central bank expects growth to stay firm, supported by technology and AI investment, even as it keeps a close watch on global energy and cost trends.