Singapore raises 2026 inflation forecast, keeps monetary policy unchanged

SINGAPORE, Jan 29 — Singapore’s central bank has raised its inflation forecasts for 2026 while keeping monetary policy unchanged for the third consecutive review, according to Channel News Asia (CNA).

The Monetary Authority of Singapore (MAS) now expects core and headline inflation to range between 1 per cent and 2 per cent next year, up from its previous forecast of 0.5 per cent to 1.5 per cent, CNA reported.

MAS said core inflation — which excludes accommodation and private road transport — is expected to rise modestly due to higher unit labour costs in the services sector, though improved productivity could help moderate price pressures. Imported inflation is likely to remain subdued, with global oil and food commodity prices projected to decline this year.

“The risks to the growth and inflation outlook are tilted to the upside at this point,” MAS said, according to CNA.

Stronger-than-expected economic growth could lift wages, boost consumer sentiment, and add to inflationary pressures.

The central bank also warned that geopolitical supply shocks could raise imported costs, while a sharp correction in global financial markets or a slowdown in AI-related investment could weaken growth and reduce inflation, CNA reported.

MAS said Singapore’s economic growth is expected to remain resilient in 2026, with underlying price pressures gradually returning to long-term trends.

As a result, it will maintain the current rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band, with no changes to the band’s width or midpoint.

“MAS is in an appropriate position to respond effectively to any risk to medium-term price stability and will continue to closely monitor economic developments amid uncertainties in the external environment,” the central bank said, according to CNA.

The decision was widely expected. Reuters reported that 15 of 16 analysts polled had anticipated MAS would keep policy unchanged. OCBC economist Selena Ling said the statement appeared “a tad more hawkish and less dovish”, flagging upside risks to both growth and inflation.

She and Maybank economist Chua Hak Bin expect MAS to slightly steepen the S$NEER later this year, CNA reported.

“A slight steepening of the S$NEER should probably be interpreted as normalisation rather than tightening per se,” Ling said, while Chua noted stronger optimism on growth alongside emerging inflation pressures.

MAS last eased monetary policy in January and April 2025 before keeping it unchanged in July and October.

Standard Chartered Bank chief economist Edward Lee said the bank had expected a slight steepening of the S$NEER but lingering uncertainties may have held MAS back this time.

“We think it is likely that MAS now only moves in April as per our initial projection,” he told CNA.

According to CNA, MAS said global growth is expected to ease modestly due to the lagged effects of higher tariffs on demand and trade, though supportive fiscal and monetary policies could mitigate the slowdown.

Singapore’s economy grew 1.9 per cent quarter-on-quarter in the fourth quarter of 2025, stronger than expected due to robust manufacturing and services performance.

Looking ahead, MAS said trade-related sectors could benefit from the global AI investment cycle, while financial services may continue to see steady lending and capital market activity.