Singapore’s central bank is weighing a policy tightening at its April 14 review in response to elevated import costs from the Iran war and higher energy prices that threaten inflation.

Singapore’s heavy reliance on imported energy makes it vulnerable to Middle East shocks, with rising fuel, electricity, and transport costs potentially feeding into inflation and dampening growth.

MAS could tilt the slope or adjust the band upwards to tackle higher inflation without unduly hampering growth.

Markets suggest a tightening bias remains appropriate if energy-driven inflation persists and growth stays under pressure.

The Q1 contraction is part of a broader growth set of risks; economists expect a weaker year ahead even as annual expansion remains firm.

Most analysts anticipate a policy tightening in April, a shift from unchanged settings in several previous reviews.

The Singapore dollar has weakened against the yuan but outperformed regional peers, with some traders pricing in at least a tightening already in the market.

Policy options include steepening the S$NEER slope, re-centering the policy band, or both, depending on how inflation and growth respond to the oil shock.

Analysts warn energy-price shocks from the Middle East could escalate inflation and weigh on global trade, helping push MAS toward a tightening bias.

Quarterly GDP is expected to dip around 1% in Q1, while full-year growth is projected near 5.9%, signaling a slowdown despite solid year-over-year momentum.

Analysts from multiple institutions see a range of tools, from steepening the NEER to repositioning the band, guided by evolving inflation and growth dynamics.

Foreign Affairs Minister warned the economic fallout from the war could worsen, underscoring policymakers’ concern about broader impacts.