Singapore’s central bank has raised its 2026 inflation forecasts, warning that higher global energy prices will continue to feed through to domestic costs and erode purchasing power.
Inflation forecasts revised higher
The Monetary Authority of Singapore (MAS) now projects both core and headline inflation to come in between 1.5% and 2.5% in 2026, up from its previous range of 1.0% to 2.0%.
The revision signals that MAS expects price pressures to be more persistent, reflecting higher costs for electricity, transport and imported goods.
UOB lifts its inflation estimates
United Overseas Bank (UOB) economist Koh said elevated oil and gas prices are expected to filter into Singapore’s consumer price index through:
- higher electricity tariffs
- more expensive transport services
- rising prices of imported goods
In response, UOB raised its 2026 headline inflation forecast to 2.0% from 1.5%, and its core inflation forecast to 1.9% from 1.5%.
MAS warns energy prices likely to stay high
MAS noted that even if energy supplies from the Middle East improve, global prices are likely to remain elevated for an extended period.
The central bank cited several factors:
- delayed deliveries and the time needed for production to fully recover
- additional global demand as governments rebuild energy reserves
These conditions are expected to push up prices of imported intermediate inputs and final consumer goods in Singapore.
Possible further monetary tightening in 2026
UOB’s baseline scenario assumes another round of monetary tightening in October 2026. The bank expects a possible 50 basis point increase in the slope of the Singapore dollar nominal effective exchange rate (S$NEER) to 1.5% per annum.
UOB added that, depending on market conditions, MAS could bring forward policy adjustments to July 2026.
The bank warned that spillover effects from higher utilities, transportation and input costs could drive both goods and services inflation higher.
Impact on cost of living and currency policy
The upward revision in inflation forecasts underscores continued pressure on household budgets and suggests the cost of living is likely to keep rising, driven mainly by international energy markets.
A tighter monetary stance, such as an adjustment to the S$NEER, is intended to strengthen the Singapore dollar. A firmer currency makes imports cheaper in local terms and can help cool domestic price increases.
Global backdrop: hotter US inflation and higher oil
The shift in Singapore’s outlook reflects a wider global pattern. The latest United States consumer price index reading for March 2026 showed an annualized increase of 3.8%, above analyst expectations.
At the same time, Brent crude futures recently moved above US$95 per barrel for the first time this year, raising shipping and production costs worldwide.
Market reaction and risk sentiment
Periods of rising inflation and reactive policy tightening typically curb demand for non-yielding assets, as capital tends to rotate towards instruments offering more stable and predictable returns.
The CBOE Volatility Index (VIX), a widely watched gauge of expected near‑term market turbulence, has climbed about 15% over the past month to close at 19.5. The move points to growing nervousness among traders about future asset price swings.
Data to watch ahead
Market participants and policymakers will now focus on upcoming employment figures and retail sales data for signs that higher prices and tighter financial conditions are slowing growth.
A weaker-than-expected jobs report, for example, could prompt officials, including those referenced by Koh, to reassess the pace and timing of any further monetary tightening.
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