Key Points
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MAS left its current monetary policy setting unchanged at its January policy review, maintaining the prevailing rate of appreciation of the S$NEER band with no adjustments to its width or the level at which it was centred. Since the October 2025 policy review, the S$NEER has continued to trade in the upper half of the policy band, reflecting resilient domestic fundamentals. MAS’ latest policy decision signals confidence that the current policy setting remains appropriate to secure medium‑term price stability, especially as the economy enters 2026 on firmer footing.
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Recent macro data showed Singapore’s GDP expanding by 1.9%qoq in Q4 after a robust Q3, underpinned by strong contributions from technology‑linked manufacturing and services benefiting from the ongoing global AI capex boom. MAS expects near‑term growth to remain resilient, supported by continued strength in the electronics supply chain, stable activity in financial services, and an ongoing pipeline of construction projects. Although global growth is likely to moderate this year as tariff effects filter through with a lag, supportive global fiscal and monetary policies should still help cushion the slowdown. MAS also notes that Singapore’s positive output gap is likely to narrow through 2026. This implies a gradual normalisation to trend growth. rather than sharp cyclical weakness. We maintain our forecasts for Singapore’s GDP growth at 3.2% in 2026.
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Inflation dynamics appear to have shifted modestly higher into early 2026 but likely remain relatively contained. What’s notable is that the MAS has raised its forecasts for 2026 core and headline CPI inflation to 1% to 2%, from 0.5%-1.5% previously, driven by healthcare, education and food prices. The upward revision to core inflation still stays within the MAS soft inflation target of 2%, but nonetheless this signals some concerns about the risk of higher inflation, given rising geopolitical tensions and higher oil prices.
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For the FX market, MAS’ steady policy stance and our estimated S$NEER’s position near the top of the policy band imply modest room for SGD outperformance. Our estimates of S$NEER show that it is about 0.5% below the upper policy band. Nonetheless, this still suggests scope for further SGD strength should the USD weaken from here. Moreover, SGD remains underpinned by Singapore’s resilient macro backdrop. As such, we still look for further strength in SGD even after it strengthened to the 1.2600 level against the US dollar.
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On rates, the 3‑month compounded SORA continues to reflect ample domestic liquidity and contained inflation pressures, trends that have anchored SORA at low levels since late last year. However, we think the 3‑month compounded SORA may be near the bottom, with a potential gentle upward drift in H2 as excess liquidity gradually recedes and inflation normalises.
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Looking ahead to the April 2026 policy meeting, MAS is more likely than not to keep its policy settings unchanged. MAS also emphasizes its readiness to respond flexibly should medium‑term price stability risks emerge. We think current macro data do not yet justify further policy adjustments. Only a sharp deterioration in global growth, a significant reversal in AI‑related capital expenditure, or an unexpected inflation shock would materially shift the policy calculus. Barring such developments, the most probable outcome in April is another steady hold as MAS remains watchful but comfortable with its present stance.
