MUFG senior currency analyst Michael Wan notes that the Monetary Authority of Singapore (MAS) tightened its exchange rate policy in April, slightly increasing the slope of the Singapore dollar nominal effective exchange rate (S$NEER) band, becoming the first Asia-ex-Japan central bank to tighten policy following the Iran conflict. MAS raised headline and core inflation forecasts while lowering growth prospects, while MUFG stresses that future moves will depend on inflation and output gap surprises.

The MAS change strengthens the Singapore dollar’s prospects

“At its April meeting, the Central Bank of Singapore tightened its exchange rate policy, slightly raising the slope of its policy band while maintaining the width and level at which it is centered.”

“In its policy statement, MAS raised its inflation forecast to 1.5-2.5% from 1-2% previously for both headline and MAS core inflation, while downgrading its growth assessment.”

“In particular, MAS concluded that GDP growth in 2026 as a whole is likely to decline relative to the above trend recorded in 2025, while at the same time the positive output gap will narrow to around zero percent.”

“Overall, MAS highlighted the highly uncertain impact of the Middle East conflict on both economic growth and inflation, although in its assessment energy supply shocks are likely to persist under various scenarios and as such will continue to drive up production costs in the coming months and quarters.”

“The next move as such is likely to depend on positive or negative surprises in the MAS assessments of inflation and the output gap.”

(This article was created with the assist of an artificial intelligence tool and has been reviewed by an editor.)