Singapore has tightened its monetary policy for the second time in three months, as rising energy costs linked to ongoing tensions in the Middle East continue to raise concerns about inflation and global supply chains.
On Monday, July 27, the Monetary Authority of Singapore (MAS) announced a slight increase in the rate of appreciation of the Singapore dollar’s nominal effective exchange rate (S$NEER) policy band. Unlike many central banks that use interest rates to control inflation, MAS manages monetary policy by adjusting the value of the Singapore dollar against a basket of currencies.
The decision surprised many economists, most of whom had expected the central bank to leave policy unchanged. MAS said inflation risks remain elevated due to higher imported costs, particularly for fuel, food and electronic components, as the conflict involving Iran continues to keep global energy markets volatile.
The central bank warned that Singapore’s imported costs are likely to increase in the coming months and projected that core inflation will begin rising from July and remain elevated into early 2027. It also cautioned that any renewed disruptions to Middle Eastern energy supplies could trigger another spike in oil prices, placing additional pressure on businesses and consumers.
Despite the inflation concerns, Singapore’s economy has remained resilient. Official advance estimates showed the country’s economy grew by 5.7% year-on-year in the second quarter of 2026, supported by strong demand for AI-related technology and electronics exports. However, policymakers acknowledged that geopolitical tensions and supply chain disruptions continue to pose significant risks to future growth.
The move comes as governments and central banks around the world closely monitor the economic fallout from the Middle East conflict. Higher energy prices have already pushed up transportation and manufacturing costs in many countries, increasing fears that inflation could remain stubbornly high despite recent progress in bringing consumer prices under control.
