MAS Monetary Policy Statement - April 2026

14 April 2026

INTRODUCTION

1. In its January 2026 monetary policy review, MAS maintained the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band, with no change to the width of the band or the level at which it was centred. Since then, the S$NEER has strengthened in the upper half of the appreciating policy band.

Chart 1
S$ Nominal Effective Exchange Rate

GROWTH BACKDROP

2. Shipping through the Strait of Hormuz has been severely constrained since late-February, and worldwide prices of crude oil, natural gas and related chemical compounds have risen sharply. Asia has seen physical shortages and increases in import prices. In the quarters ahead, higher inflation will also erode real incomes and crimp final demand.

3. Overall, growth in Singapore's major trading partners will come in weaker than previously expected, reflecting drags on industrial production and expenditure. Nonetheless, economic activity in some advanced markets should remain relatively resilient, while global AI-related investment is expected to continue apace for now.

4. Advance estimates from MTI show that the economy expanded at a firm pace of 4.6% y-o-y in Q1 2026. Growth continued to be underpinned by the manufacturing and services clusters that are tied to the global AI capex cycle. On a quarter-on-quarter seasonally-adjusted basis, Singapore's GDP declined by 0.3% in Q1 2026, following the 1.3% expansion in the preceding quarter. This reflected an expected moderation in activity in the trade-related and modern services clusters after their strong performance late last year.

5. There is significant uncertainty around the outlook for shipping flows through the Strait of Hormuz. In the meantime, the accumulated energy supply shortfalls and higher input costs will continue to weigh on the outlook for the Singapore economy. These will exert drags on value-added in energy-dependent industries such as petrochemicals and transport. As a broader range of Singapore's imported costs rise over time, profitability in more sectors will be impacted. Nevertheless, continued global AI-related capex spending as well as resilient regional electronics production should sustain activity in Singapore's technology-related sectors. A steady pipeline of domestic public infrastructure and housing investment will also support growth.

6. The situation in the Middle East is evolving and remains highly uncertain. GDP growth in 2026 as a whole is likely to step down from the above-trend pace of growth recorded in 2025. Concomitantly, the positive output gap will narrow. An update to the earlier GDP forecast of 2.0-4.0% will be provided in May.

INFLATION OUTLOOK

7. MAS Core InflationMAS Core Inflation excludes the costs of accommodation and private transport from CPI-All Items inflation. held steady at 1.2% y-o-y in Jan-Feb 2026, unchanged from the preceding quarter. Prior to the Middle East conflict, import costs for oil and food were declining on a year-ago basis while regional inflation was modest. Domestically, enhanced subsidies had lowered the CPI for pre-school education in January.

8. However, Singapore's import prices of crude oil, natural gas and fuel have risen sharply and will directly add to electricity & gas and transport-related CPI 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. Deliveries will be lagged, supply will take time to recover fully, while governments seeking to rebuild energy reserves will add to pent-up demand. As higher energy costs pass through supply chains worldwide, a broader range of Singapore's import costs will increase. 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 & other goods should also pick up.

9. The forecasts for MAS Core Inflation and CPI-All Items inflation have both been raised to 1.5-2.5%, from 1.0-2.0% previously. For the non-core items, private transport inflation will come in higher due to the hike in fuel prices. However, this will be offset to some extent by subdued accommodation inflation amid weaker housing rental growth over the past year.

RISKS TO THE OUTLOOK

10. There are considerable risks around the outlook for inflation and growth. A more persistent disruption to energy supplies will exacerbate inflationary pressures worldwide, as well as deepen the drag on growth. Shortages of key intermediate inputs could also abruptly curtail industrial production. A further tightening in global financial conditions or unexpected pullback in AI-related investment could compound downside risks to growth.

MONETARY POLICY

11. GDP growth in the Singapore economy will slow over the course of this year, while the output gap should average around zero percent. 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.

12. 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.

13. 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. MAS also stands ready to curb excessive volatility in the S$NEER.

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Related:

Past Monetary Policy Decisions