MAS raised its 2026 core and headline inflation forecast ranges to 1.5–2.5%, up from 1.0–2.0% in the January 2026 MPS. The move follows higher imported energy costs and a firmer view on inflation than on growth.
The policy statement said global energy prices may stay elevated even if Middle East supplies return. It cited delivery delays, time needed to restore supply, and government efforts to rebuild energy reserves that could add demand.
MAS expects prices for Singapore’s imported intermediate and final consumer goods to rise. Higher oil and gas prices are expected to feed into CPI through electricity, transport and goods.
UOB raised its 2026 headline inflation forecast to 2.0% from 1.5%, and its 2027 forecast to 2.2%. It also lifted its 2026 core inflation forecast to 1.9% from 1.5%, with a 2027 core forecast of 1.9%.
Under UOB’s baseline, MAS is expected to tighten policy at the October 2026 MPS by steepening the S$NEER band slope by 50 bps to 1.5% per annum. It also flagged the possibility of a move at the July 2026 MPS.
The Monetary Authority of Singapore has lifted its 2026 inflation forecast to 1.5–2.5%, signaling a more aggressive stance against rising prices. This is driven by an imported energy shock that will push up electricity and transport costs. We believe this makes a tightening of monetary policy, which would strengthen the Singapore dollar, highly likely this year.
This outlook is supported by recent global events, with Brent crude oil futures now trading above $110 per barrel following supply disruptions in the Middle East. We have not seen sustained prices at this level since the market volatility of mid-2022. This external pressure makes it difficult for domestic inflation to cool down on its own.
Given this, we see a growing chance that the MAS will tighten policy by steepening the S$NEER slope as early as the July meeting, rather than waiting until October. Derivative traders should therefore consider positioning for Singapore dollar strength against its major trading partners in the coming weeks. Waiting too long may mean missing the most opportune moment to enter such trades.
Looking back at the tightening cycle we saw from late 2021 through 2022, the MAS consistently acted to strengthen the currency to combat inflation. Each policy steepening during that period resulted in a notable appreciation of the Singapore dollar. We expect a similar market reaction this time around.
The forwards market is already beginning to price in a stronger Singapore dollar over the next six months, particularly around the July and October policy dates. We are also seeing a pickup in demand for options that would profit from a stronger SGD. This suggests the market is building expectations for a policy move.
