Singapore tightens policy twice in 2026 to curb imported inflation

SINGAPORE, 7 AUGUST 2026 —

The Monetary Authority of Singapore raised its policy settings in April and July after the Middle East conflict pushed up energy prices, even as the city-state’s economy grew 6% in the first half of 2026.

At the MAS Annual Report 2025/2026 media conference on 28 July 2026, managing director Chia Der Jiun said the central bank had maintained an appreciating stance through the second half of 2025 and into January 2026. It then tightened in April as energy and commodity prices rose.

Chia said the April move had placed policy in a favourable position heading into a stronger inflationary environment. A second calibrated adjustment in July sharpened the Singapore dollar’s appreciation against incoming inflationary pressures.

“Inflation is forecast to step up further in July and stay elevated over the next few quarters before easing in the second half of 2027,” he said.

MAS Core and CPI-All Items inflation are projected to average 1.5–2.5% in 2026. Core inflation climbed from below 1.0% in 2025 to 1.4% in the first quarter of 2026 and 1.5% in the second, according to the report.

Strong AI investment across data centres, chips and computing infrastructure has underpinned resilient global trade and industrial production, even as tariffs and geopolitical shocks weighed on parts of the economy. Singapore’s technology-linked sectors offset double-digit contractions in energy-intensive segments such as chemicals manufacturing, delivering headline growth of 6% year-on-year in the first half of 2026 compared with 5% in the second half of 2025.

Chia warned that the sustainability of the AI investment boom remains a key uncertainty for global growth and financial stability. AI-connected firms now account for roughly 40% of the S&P 500’s market capitalisation and more than 30% of the MSCI EM Asia Index, while representing 87% of new venture capital funding in US markets.

“Revenue growth will in turn depend on early signs of AI productivity gains at the firm level broadening across the economy,” he said.

Malaysia’s semiconductor and data-centre supply chain benefits from sustained AI-related investment, given the country’s role as a regional assembly and test hub for global chipmakers. Sustained AI capital expenditure could lift demand for Malaysian-made components and contract manufacturing services, though the MAS statement did not cite a direct link to its policy decisions.

The MAS said it would remain vigilant to risks to price stability and volatility in the Singapore dollar nominal effective exchange rate, noting that any abrupt reassessment of AI investment payoffs could trigger market volatility.

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