Ongoing geopolitical tensions in the Middle East are expected to keep energy prices elevated for an extended period, increasing the risk of inflation. Singapore's central bank unveiled a new round of monetary tightening on Monday to counter these rising price pressures.

The Monetary Authority of Singapore (MAS) does not use interest rates as its primary policy tool but instead relies on exchange rate management. In a statement, the MAS announced it would slightly increase the slope of the appreciation path for the Singapore dollar's nominal effective exchange rate policy band, while keeping the width and center of the band unchanged.

Of the 18 analysts surveyed by the media, only four predicted the MAS would steepen the appreciation slope, one predicted a shift in the band's center, and the remaining 13 expected policy to remain unchanged.

"In the period ahead, external imported price pressures are likely to persist and feed through more broadly into domestic consumer prices," the MAS said in its statement.

Policymakers are currently weighing the complex effects of the US-Iran conflict: higher oil prices exacerbate inflation, while the conflict could trigger a global economic slowdown. At the same time, an artificial intelligence boom is boosting export growth and providing support to the economy.

Singapore's economy grew 5.7% year-on-year in the last quarter, and the full-year growth rate could surpass the government's initial forecast range of 2%–4%.

Meanwhile, the Trump administration's reintroduction of tariffs has increased global trade uncertainty. Singaporean goods were hit with a 12.5% tariff last Friday, though the country's key electronics and pharmaceutical exports to the US are currently exempted.

Despite these multiple pressures, inflation in Singapore has ticked up but remains relatively modest for the year. The inflation rate last month was 1.6%, below the MAS's medium-term target of around 2%. The MAS stated on Monday, "Over the coming quarters, Singapore's import costs are likely to continue rising."