SINGAPORE has tightened its monetary policy stance for the first time since 2022, as surging global energy prices triggered by the Iran conflict drive inflationary pressures and cloud the economic outlook.
The Straits Times cited the Monetary Authority of Singapore (MAS) saying on Tuesday that it would steepen the slope of its Singapore dollar nominal effective exchange rate policy band, signalling a controlled appreciation of the currency to offset rising import costs.
At the same time, the central bank raised its 2026 inflation forecasts, projecting both headline and core inflation to average between 1.5 and 2.5 per cent, up from its earlier estimate of 1 to 2 per cent.
“Singapore’s imported energy costs have already risen. Prices of a wider range of imported goods and services are expected to increase in the quarters ahead. Consequently, MAS core inflation will pick up and remain elevated over the next few quarters.
“MAS will, therefore, increase slightly the rate of appreciation of the S$NEER policy band. There will be no change to its width and the level at which it is centred.”
The S$NEER framework manages the Singapore dollar against a trade-weighted basket of currencies, forming the cornerstone of the city-state’s exchange rate-based monetary policy.
Singapore’s S$NEER framework is the core mechanism MAS uses to conduct monetary policy instead of setting interest rates like most central banks. S$NEER stands for Singapore dollar Nominal Effective Exchange Rate.
The move comes as oil and natural gas prices surge following the escalation of conflict in the Middle East, including disruptions to shipping through the Strait of Hormuz, a critical artery for global energy supplies.
MAS warned that higher crude oil, gas and fuel prices will directly feed into electricity, transport and broader consumer costs in the months ahead.
“Even if supplies from the Middle East are restored, global energy prices are likely to remain elevated for some time,” the central bank said, adding: “As higher energy costs pass through supply chains worldwide, a broader range of Singapore’s import costs will increase.”
Prices of imported intermediate goods and final consumer products are also expected to rise, with knock-on effects for food, retail and other everyday expenses.
The tightening step had been widely anticipated by analysts, particularly after the central bank flagged in March the risk of escalating energy prices amplifying imported inflation.
Alongside rising price pressures, Singapore’s growth momentum is beginning to soften. The Ministry of Trade and Industry reported that the economy expanded by 4.6 per cent year-on-year in the first quarter of 2026, down from 5.7 per cent in the previous quarter.
On a quarter-on-quarter basis, however, output contracted by 0.3 per cent, reversing a 1.3 per cent expansion in the final quarter of 2025, signalling weakening near-term momentum.
“While GDP growth remained resilient in the first quarter of 2026, the US-Israel-Iran conflict that began in end-February may weigh on economic activity in the coming quarters,” the ministry said.
Although the official full-year growth forecast of 2 to 4 per cent remains unchanged for now, an update is expected in May as external conditions evolve.
MAS cautioned that overall economic expansion in 2026 is likely to moderate from the stronger pace recorded last year.
“GDP growth in 2026 as a whole is likely to step down from the above-trend pace of growth recorded in 2025.”
The central bank warned that persistent energy supply disruptions and rising input costs will increasingly weigh on key sectors, particularly energy-intensive industries such as petrochemicals and transport.
“These will exert drags on value-added in energy-dependent industries such as petrochemicals and transport,” MAS said, adding: “As a broader range of Singapore’s imported costs rise over time, profitability in more sectors will be impacted.”
Analysts say the inflationary effects of higher fuel and electricity prices are already visible, while the broader economic impact is expected to build as supply constraints intensify and global demand softens.
The wider global outlook is also deteriorating. The International Monetary Fund is widely expected to downgrade its growth projections at its upcoming spring meetings with the World Bank.
Managing Director Kristalina Georgieva said last week: “Had it not been for this shock, we would have been upgrading global growth. But now, even our most hopeful scenario involves a growth downgrade.’’ - April 14, 2026
