The Monetary Authority of Singapore has tightened monetary policy for the second consecutive time, acting preemptively against a renewed and sharp rise in global oil prices.
The MAS said it will increase the rate of appreciation of the Singapore dollar’s nominal effective exchange rate policy band “very slightly,” with the adjustment described as smaller than the one made in April.
The width of the band and the level at which it is centered were left unchanged, keeping the overall framework broadly stable while applying incremental pressure on inflation.
Unlike most central banks, the MAS conducts monetary policy by managing the Singapore dollar exchange rate against a trade-weighted basket of currencies within an undisclosed band, rather than setting interest rates.
“In an environment of continued heightened uncertainty, this calibrated adjustment to the policy stance builds on the tightening in April,” the MAS said in its statement.
Singapore’s core inflation, which excludes accommodation and transportation costs, ticked up to 1.6% in June from 1.4% in May, sitting near the bottom of the MAS’s 1.5%–2.5% forecast range for the year.
Headline inflation came in at 1.9%, reflecting a broader pickup in prices even as some categories of consumer spending remained relatively contained.
BMI, a FitchSolutions company, noted that while transportation fuel prices rose quickly following the onset of the U.S.-Iran conflict, softer services inflation in healthcare, communication, and education helped offset much of the upward pressure.
“Imported-cost pressures typically pass through to broader consumer prices with a lag, so we still expect inflation to rise in the coming months,” the intelligence group said.
Singapore’s near-total reliance on imported energy makes it particularly vulnerable to swings in global oil markets, amplifying the policy challenge facing the MAS.
Brent crude climbed back above $100 a barrel last week after Houthi militants attacked two Saudi tankers in the Red Sea, deepening supply concerns that had briefly eased following a period of relative calm in the region.
The latest escalation came after the collapse of a Middle East ceasefire, which had previously offered markets some hope that energy supply disruptions might be contained.
Despite the external turbulence, Singapore’s economy has shown considerable resilience, with strong demand for electronics driven by continued global investment in artificial intelligence infrastructure.
Singapore’s gross domestic product expanded 5.7% in the second quarter from a year earlier, beating the 5.5% median estimate in a Reuters survey of economists.
That result came in well above the government’s own full-year growth projection of 2% to 4%, suggesting domestic economic momentum remains robust even as external risks intensify.