The Monetary Authority of Singapore (MAS) announced on the 27th that it would make a slight adjustment by increasing the slope of the Singapore dollar's nominal effective exchange rate policy band. This is the second consecutive tightening of monetary policy since April, aimed at preemptively managing the risk of imported inflation stemming from a rebound in global oil prices.

Unlike most central banks, which adjust benchmark interest rates, the MAS primarily conducts monetary policy by managing the Singapore dollar's nominal effective exchange rate band against a basket of currencies of its major trading partners. In its policy statement released that day, the MAS said that amid the ongoing high uncertainty in the external environment, this fine-tuning of the policy stance is a continuation of the tightening measures taken in April.

Market institutions had widely expected the MAS to maintain its current policy settings, making this move a surprise. Analysts noted that because Singapore's energy needs are almost entirely met through imports, the recent sharp rebound in global crude oil prices due to geopolitical conflicts has directly intensified imported cost pressures.

Data shows that Singapore's core inflation rate rose to 1.6% in June, while the headline inflation rate was 1.9%. Financial institutions predict that given the time lag between higher import costs and their transmission to consumer prices, domestic inflation indicators could still trend upward in the coming months.

At the same time, Singapore's robust economic fundamentals provide support for the tighter policy. Driven by global demand for artificial intelligence, which boosted electronics exports, Singapore's gross domestic product (GDP) grew by 5.7% year-on-year in the second quarter of this year. This figure not only surpassed the market's consensus expectation of 5.5% but also significantly exceeded the government's full-year economic growth forecast.