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SINGAPORE – Singapore’s central bank on April 14 tightened its monetary policy stance for the first time since 2022 to allow for a stronger currency in the face of soaring oil and natural gas prices from the Iran war.
The Monetary Authority of Singapore (MAS) said it has steepened the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band – signalling that it will allow the currency to appreciate and dampen the impact of rising import costs.
MAS also raised its all-items and core inflation forecasts for 2026 to an average of 1.5 per cent to 2.5 per cent, up from an earlier projection of 1 per cent to 2 per cent.
“Singapore’s imported energy costs have already risen. Prices of a wider range of imported goods and services are expected to increase in the quarters ahead. Consequently, MAS core inflation will pick up and remain elevated over the next few quarters.
“MAS will therefore increase slightly the rate of appreciation of the S$NEER policy band. There will be no change to its width and the level at which it is centred.”
The S$NEER refers to the exchange rate of the Singapore dollar against a trade-weighted basket of currencies from Singapore’s major trading partners.
MAS said Singapore’s imported prices of crude oil, natural gas and fuel have risen sharply and will directly add to electricity and gas and transport-related inflation in the months ahead.
“Even if supplies from the Middle East are restored, global energy prices are likely to remain elevated for some time,” the central bank said, adding: “As higher energy costs pass through supply chains worldwide, a broader range of Singapore’s import costs will increase.”
MAS said prices for Singapore’s imported intermediate and final consumer goods are forecast to rise. Consequently, consumer price inflation for domestic non-cooked food and retail and other goods should also pick up.
Most analysts had expected MAS to tighten its monetary policy in April, after the central bank in a report on March 23 acknowledged the risk of soaring global energy prices – amid the conflict in the Middle East – driving up Singapore’s import cost pressures in the near term.
Global oil and natural gas prices have surged since Feb 28 when the United States and Israel launched an air campaign against Iran. The Islamic republic in turn has effectively blocked the Straits of Hormuz that in peace time allowed flow of a fifth of global oil and natural gas supplies from the Persian Gulf.
A two-week ceasefire appears tenuous after peace talks between the US and Iran, held in Pakistan over the weekend, failed to reach an agreement. The US has responded by announcing its own blockade of Iranian ports.
MAS also said Singapore economy’s will slow in the coming quarters.
While the inflationary impact from the energy supply shock is already reflected in rising prices of petrol, diesel, jet fuel and electricity, the hit to growth will gradually build up as industrial input shortages intensify, analysts said.
This will in turn dampen demand and slow down economic growth worldwide.
The International Monetary Fund is widely expected to cut its forecast for global growth this week when it begins its twice-yearly spring meetings along with the Word Bank.
Last week, IMF Managing Director Kristalina Georgieva said: “Had it not been for this shock, we would have been upgrading global growth. But now, even our most hopeful scenario involves a growth downgrade.’’
On April 14, the Ministry of Trade and Industry (MTI) said the Singapore economy grew by 4.6 per cent on a year-on-year basis in the first quarter of 2026, moderating from the 5.7 per cent growth in the previous quarter.
However, showing the momentum and the trajectory, the economy contracted by 0.3 per cent on a quarter-on-quarter seasonally adjusted basis, MTI advance estimates showed. That is a reversal from the 1.3 per cent expansion in the fourth quarter of 2025.
MTI said; “While GDP growth remained resilient in the first quarter of 2026, the US-Israel-Iran conflict that began in end-February may weigh on economic activity in the coming quarters.”
