MAS keeps policy unchanged as core inflation projections soften, signaling a cautious approach to the Singapore Dollar's appreciation path amid cooling global demand.
The Singapore Dollar faces conflicting pressures following the MAS decision to maintain its current exchange rate policy despite market expectations for tightening. While the central bank's decision to hold reflects a cooling AI cycle and easing inflation projections for 2027, the commitment to a gradual appreciation of the policy band provides a structural floor for the currency against imported inflation.
No, the MAS surprised markets by holding its exchange rate policy unchanged.
The MAS projects that core inflation will begin to ease starting from mid-2027.
The Monetary Authority of Singapore surprised markets by maintaining its exchange rate policy in October, defying expectations for a tightening move. MUFG analysts note that the decision reflects a cooling AI cycle and a narrowing output gap, though the central bank maintains a bias toward gradual appreciation to combat imported inflation.
The decision was driven by expectations of easing core inflation, subdued domestic costs, and a narrowing output gap as the global AI cycle cools.
Despite the hold, the MAS maintains forward guidance for a gradual appreciation of the policy band to counter imported inflation.