MAS keeps monetary settings unchanged, flags firm growth

SINGAPORE — Singapore's central bank kept its monetary policy settings unchanged on Thursday (Jan 28) and flagged upside risks to inflation and demand as the outlook for the city-state's economy remained resilient.

The Monetary Authority of Singapore (MAS) said it will maintain the prevailing rate of appreciation in its exchange rate-based policy band.

There would be no change to the width of the policy band or the level at which it is centred.

"The risks to the growth and inflation outlook are tilted to the upside at this point. Persistently stronger-than-expected GDP growth could lead to higher wage growth and boost consumer sentiment, exacerbating demand-pull inflationary pressures," the MAS said.

"Nevertheless, some downside risks are also present, reflecting underlying fragilities in the global economy."

Selena Ling, OCBC economist, said the tone in the central bank's statement was "a tad more hawkish and less dovish, flagging upside risks to both growth and inflation."

Of the 16 analysts polled by Reuters ahead of the review, 15 expected the MAS to keep policy settings unchanged, citing a resilient growth outlook buoyed by semiconductor exports. Only one had expected a tightening.

Analysts now expect a tightening at later reviews in the year. Maybank economist Chua Hak Bin and OCBC's Ling both forecast MAS slightly steepening the appreciation bias at reviews later in the year.

"A slight steepening of the S$NEER should probably be interpreted as normalisation rather than tightening per se," said Ling, referring to the Singapore dollar nominal effective exchange rate, known as S$NEER.

Chua said: "We are more positive on the growth outlook and see simmering inflation pressures emerging."

MAS' decision came as preliminary government data showed the economy grew 4.8 per cent in 2025, higher than a government forecast of around 4.0 per cent, while core inflation was 1.2 per cent year on year in December.

The trade ministry has previously forecast this year's GDP growth at 1.0 per cent to 3.0 per cent.

In December, Prime Minister Lawrence Wong flagged challenges to sustaining Singapore's 2025 pace of growth this year.

The MAS also updated its core inflation and headline inflation forecasts for 2026 to 1.0 per cent to 2.0 per cent for both, from a previous 0.5 per cent to 1.5 per cent for both.

The Federal Reserve held interest rates steady on Wednesday due to what US central bank chief Jerome Powell described as a solid economy and diminished risks to both inflation and employment.

At its previous reviews in October and July, the MAS kept policy unchanged, after easing in April and January.

Instead of using interest rates, Singapore manages monetary policy by letting the local dollar rise or fall against the currencies of its main trading partners within the S$NEER, an undisclosed trading band.

It adjusts policy via three levers: the slope, midpoint and width of the policy band.

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