APAC Economic Comment: MAS: Earlier tightening, smaller move

Research evidence excerpt

APAC Economic Comment: MAS: Earlier tightening, smaller move

tement struck a mildly hawkish tone, consistent with

the decision to tighten policy. While MAS left its core and headline inflation forecasts

unchanged at 1.5–2.5%, it emphasized potential spillovers from imported goods

inflation to upstream and intermediate inputs, including food, capital equipment, and

construction materials, while also flagging weather-related risks. On growth, the

statement highlighted the strength of three key sectors: technology-related industries,

particularly manufacturing; construction, supported by a substantial pipeline of public

and private projects; and financial services, where strong credit growth was explicitly

noted. The breadth of these drivers suggests a more durable and broad-based expansion

rather than one concentrated in a narrow set of sectors as we've noted in a recent note.

Consistent with this assessment, MAS now expects the output gap to "widen slightly in

2026", compared with its April view that it would "narrow to around zero in 2026".

Following the stronger-than-expected Q2 advance GDP estimates, which showed

output expanding at 5.7% y/y (versus our expectation of 4.7%), we are taking the

opportunity to mark our Singapore GDP growth forecast to market, raising our 2026

forecast to 5.0% from 4.1% previously.

Policy is mildly restrictive, but further tightening remains possible

Today's move puts MAS further ahead of the curve on potential inflation shocks while

preserving flexibility to recalibrate policy should weather-related supply disruptions

materialise, labour market conditions tighten further, or broader demand-pull inflation

pressures emerge. We do not rule out a further increase in the policy slope at the