Market Update: MAS delivers surprise tightening

Highlights: The Monetary Authority of Singapore (MAS), Singapore’s central bank, surprised the markets by delivering an unexpected tightening of monetary policy in its meeting on 27 July 2026. This comes on the back of a policy tightening in its April meeting. We upgrade our 2026 GDP growth forecast to 4.6 per cent and look for MAS to tighten monetary policy setting again in October. We retain our mild overweight stance on MSCI Singapore but expect USD/SGD to continue to trade in a range.

• The MAS, which uses the exchange rate rather than interest rates as its main policy tool, raised the slope of the SGD NEER band, while keeping the centre and the width of the band unchanged. MAS increased the slope “very slightly” which likely implies that the slope of the SGD NEER band has been increased by 0.25 per cent to 1.25 per cent
• Singapore’s robust growth trajectory also gives the central bank greater confidence to focus on tackling inflation. The tailwind from the artificial intelligence boom, along with the resilience in the construction and services sectors leads us to upgrade our 2026 GDP growth forecast to 4.6 per cent (from 3.3 per cent previously)
• We expect the MAS to tighten the monetary policy again in October and bring the SGD NEER slope to 1.50 per cent
• FX: We expect the SGD to appreciate modestly versus key trading partners. However, given our bullish USD stance, we expect USD/SGD to trade in a range over the near term
• Equities: We retain our mild overweight stance on Singapore equities, as they remain underpinned by solid fundamentals, the attractive dividend yield and offer high quality and defensive exposure