UOB strategists interpret Monetary Authority of Singapore's (MAS) July 2026 MPS as a calibrated tightening via a modest increase in the Singapore Dollar (SGD) Nominal Effective Exchange Rate (NEER) slope to an estimated 1.25% per annum, smaller than April’s move. They expect MAS to maintain this setting, but flag upside risk of another slope steepening if energy prices stay elevated and demand-pull pressures emerge.

Calibrated S$NEER slope steepening outlook

"MAS tightened policy in the Jul 2026 MPS by increasing the rate of appreciation of the S$NEER band, while leaving the width and centre unchanged."

"However, the extent of the tightening was smaller than in Apr 2026, which we interpret as a 25bps slope steepening to 1.25% p.a., reflecting a more calibrated approach to policy tightening."

"We expect MAS to keep the prevailing S$NEER slope settings (est. 1.25% p.a.) unchanged for the rest of 2026 and 2027, although we see risks of a further 25bps slope steepening to 1.50% p.a. in the Oct 2026/Jan 2027 MPS should energy prices remain elevated for longer and percolate into the broader CPI basket."

"In addition, we will be watching for signs of demand-pull pressures emanating from a significantly larger-than-expected positive output gap."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)