The Monetary Authority of Singapore has announced at its meeting today that it will retain current monetary policy settings. The MAS pursues its inflation and growth objectives by adjusting the direction, slope, width, and central level of an undisclosed"band" around its measure of Singapore's nominal effective exchange rate. Officials today announced that they will target the same pace of appreciation.

GDP data published earlier in the month showed Singapore's economy grew by 1.4 percent on the quarter in the three months June, rebounding from a contraction of 0.6 percent in the three months to March, with year-over-year growth also picking up. Core inflation remained steady and low at 0.6 percent in June, well down on levels recorded late last year.

In the statement accompanying today's decision, officials expressed confidence that global trade tensions would have a less severe impact on external demand than previously anticipated, though they still expect GDP growth to slow in the second half of the year and remain uncertain about the 2026 growth outlook. Officials also expect inflation pressures to remain contained, forecasting both headline and core CPI inflation to average between 0.5 percent and 1.5 percent.

Having already adjusts its exchange rate target in its two policy meetings, officials concluded that no further policy easing was warranted today. They also believe that current policy settings will allow them to respond to any risks to medium-term price stability, suggesting they are open to adjusting the target again in coming meetings.

The Monetary Authority of Singapore conducts monetary policy by managing a trade-weighted nominal effective exchange rate, reflecting Singapore's status as a small and open economy highly dependent on global trade and capital flows. This exchange rate is allowed to fluctuate within a policy band, with officials adjusting the slope, width, and central level of the policy band in order to maintain price stability. Although the MAS does not have an explicit inflation target, MAS officials consider that keeping core inflation just under 2.0 percent is consistent with overall price stability in the economy.

Officials review policy every six months in April and October but are also prepared to make adjustments at other times as required. Adjustments that strengthen the exchange rate are equivalent to a tightening of monetary policy, while adjustments that weaken the exchange rate are equivalent to a loosening of monetary policy.

The exchange rate affects the economy in a significant way, particularly for a small and open economy like Singapore. A stronger exchange rate tends to slow economic activity by making exports more expensive to foreigners, while a weaker exchange rate tends to stimulate economic activity by making exports less expensive to foreigners. The exchange rate also has a direct and indirect effect on prices in the domestic economy, with a stronger exchange rate tending to restrain inflation and a weaker exchange rate tending to push up inflation.