The Monetary Authority of Singapore (MAS) said on Tuesday (Jan 25) that it was tightening its monetary policy settings amid a further upward shift in Singapore’s inflation outlook.

The adjustment falls outside of MAS’ normal cycle of twice-yearly monetary policy reviews, typically in April and October.

MAS will “slightly” raise the rate of appreciation of its monetary policy band given the risks of higher core inflation in the near term, it said.

There will be no change to the width and the level at which the Singapore dollar’s nominal effective exchange rate (S$NEER) policy band is centred.

“This move builds on the pre-emptive shift to an appreciating stance in October 2021 and is appropriate for ensuring medium-term price stability,” said MAS.

MAS manages monetary policy through exchange rate settings, rather than interest rates, letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed band.

It adjusts its policy via three levers: The slope, mid-point and width of the policy band, known as the S$NEER.

In last October’s review, MAS shifted the S$NEER band on to a gradual appreciation path from 0 per cent previously.

There has been a “further upward shift in Singapore’s inflation outlook, reflecting both global and domestic factors” since the last monetary policy statement in October last year, said the authority.

“MAS has therefore assessed that it is appropriate to make another pre-emptive adjustment in its monetary policy stance at this juncture,” it said.

MAS is revising its inflation forecasts for this year. Core inflation is now projected to be 2 per cent to 3 per cent this year, up from the 1 per cent to 2 per cent expected in October.

Meanwhile, CPI-All Items inflation is expected to be 2.5 per cent to 3.5 per cent, from the earlier forecast range of 1.5 per cent to 2.5 per cent.

The authority said that over the last three months, the S$NEER has broadly appreciated within the upper half of the policy band.


The outlook for Singapore’s inflation has shifted higher since October last year, amid recovering global demand and “persistent supply-side frictions”.

“There remain upside risks to inflation arising from the impact of pandemic-related and geopolitical shocks on global supply chains,” said MAS.

Energy prices have risen further while imported food inflation remains elevated due to regional supply disruptions, MAS added.

The authority noted that core inflation stepped up over October to December last year.

Core inflation rose to 1.5 per cent in October – the highest level in nearly three years – and to 1.6 per cent in November.

Data released on Monday showed core inflation rose to 2.1 per cent in December, driven by an increase in services inflation mainly due to a steeper rise in airfares.

“The CPI for airfares has also increased sharply, mostly reflecting the cost of COVID-19 testing requirements for international travel,” MAS said, referring to the consumer price index.

The domestic labour market has tightened, with the resident unemployment rate now close to its pre-pandemic level and wage growth above its historical average, said MAS.

“Against this backdrop, price increases across a broad range of goods and services have been stronger than forecast,” the authority said.

It projected that core inflation could pick up and reach 3 per cent by the middle of the year before moderating.


Singapore’s gross domestic product (GDP) growth forecast for 2022 remained unchanged at 3 per cent to 5 per cent “barring fresh disruptions”, said MAS.

It noted that the economy grew 2.6 per cent on a quarter-on-quarter basis in Q4 2021, stronger than the preceding quarter, according to advance estimates released earlier this month.

“The economic recovery, which has thus far been led by the trade-related and modern services sectors, should extend to the domestic-oriented and travel-related sectors over the course of this year as domestic safe management measures and border restrictions are progressively eased,” said MAS.

It added that global economic prospects remain “largely intact”.

“The Omicron variant that emerged in late 2021 may temporarily dampen specific clusters of activity, but is unlikely to derail the broader ongoing economic recovery,” said MAS.