MAS likely to retain policy in October, says Morgan Stanley, but outlines 3 scenarios for policy shift

SINGAPORE: The Monetary Authority of Singapore (MAS) will likely keep its current policy unchanged at its October meeting, according to Morgan Stanley. However, the firm said that could change, depending on how economic conditions evolve.

According to Singapore Business Review, Morgan Stanley said that MAS may shift to a zero per cent appreciation stance for the Singapore dollar’s nominal effective exchange rate (S$NEER) if economic growth slows and disinflation pressures intensify. Meanwhile, MAS may lower the centre of its policy band if a global recession significantly impacts domestic growth.

On the other hand, the central bank may consider tightening through a steeper slope of the policy band, though Morgan Stanley sees this as unlikely in the near future and expects it to be an option in 2026 only if economic growth outpaces expectations and the output gap closes quickly.

On Thursday (July 30), MAS said it will maintain the current rate of appreciation of the S$NEER policy band, with no changes to its width and the level at which it is centred amid stronger than expected growth. The decision followed two rounds of easing earlier this year, in January and April.

Still, Morgan Stanley cautioned that the outlook remains uncertain and tilted towards further easing if either growth or inflation turns out weaker than expected.

MAS stated, “Prospects for the Singapore economy remain subject to significant uncertainty, especially in 2026. Changes in effective tariff rates worldwide could impact the performance of Singapore’s externally-oriented sectors. Renewed trade conflict, financial or geopolitical shocks would also exacerbate the drags posed by the global slowdown, and in turn weigh on domestic GDP growth.” /TISG

Read also: Rising trade tensions spark concern over Singapore’s pharmaceutical and semiconductor exports: RHB

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