By Xinghui Kok and Jun Yuan Yong
SINGAPORE, Oct 9 (Reuters) - Singapore is expected to tighten monetary policy at a scheduled review on Wednesday as robust growth and inflation risks bolster the case for another move.
All 10 analysts polled by Reuters expect the Monetary Authority of Singapore (MAS) to tighten policy on October 14.
The MAS surprised markets in July by "very slightly" tightening policy, adding to a policy move in April this year.
The Middle East conflict has caused significant uncertainty
as tensions escalate, with oil prices rising even as talks continue between Iran and the US to reopen the Strait of Hormuz ahead of the November 3 US midterm elections.
OCBC economist Selena Ling said there is upside risk to core inflation as a widening Middle East conflict threatens to broaden sticky price pressures across goods and services, while the threat of a "super El Niño" could further drive up food costs.
The weather pattern has the potential to cause floods, droughts, extreme heat and crop losses across the world and is expected to reach peak intensity by early 2027.
Singapore manages monetary conditions by letting the local dollar rise or fall against the currencies of its main trading partners within an undisclosed trading band, known as the Singapore dollar nominal effective exchange rate, or S$NEER.
It adjusts settings via three levers: the slope, mid-point and width of the band.
Barclays economist Brian Tan said he expects the central bank to again raise the slope of its exchange rate policy band by a slight 25-basis-point adjustment, as the "sheer magnitude of the AI boom" drives relatively robust gross domestic product growth heading into 2027.
"However, the reality that the translation of economic growth to inflation has likely proved to be milder than the MAS expected will likely continue to restrain the central bank from a more aggressive pace of tightening," he said.
Core and headline inflation in August stood at 2.2% and 2.3%, respectively, official data showed last month. For the full year, MAS expects core and headline inflation to average 1.5% to 2.5% in 2026.
Central banks are facing a tougher battle against inflation as the Iran war pushes oil prices higher, feeding through to transport, energy and production costs worldwide.
The US Federal Reserve raised rates by a quarter-percentage point last month, while markets are also betting on more rate hikes by the European Central Bank as euro zone inflation continues to trend higher.
(Reporting by Xinghui Kok and Jun Yuan YongEditing by Shri Navaratnam)
