March 25, 2025
SINGAPORE – Singapore’s core inflation declined for the fifth straight month in February after falling sharply in January as most spending categories saw smaller year-on-year price increases.
Prices also fell for two categories – electricity and gas, and retail and other goods – the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in their joint report on March 24.
Economists said Singapore inflation will continue to ease in the months ahead, with a chance that consumer prices might even drop if the global economy takes a sharp turn downwards.
For February, core inflation, which excludes private transport and accommodation costs to better reflect the expenses of households here, eased to 0.6 per cent year on year.
This is the lowest since June 2021 when it was 0.6 per cent, and much lower than the 3.6 per cent rate recorded in February 2024. It is also below the 0.7 per cent forecast by economists in a Bloomberg poll.
In January, core inflation slid to 0.8 per cent from 1.7 per cent in December 2024. Starting with January, the consumer price index (CPI) has been rebased to a base year of 2024 from 2019. Rebasing is conducted once every five years to reflect the latest consumption patterns of Singapore households.
After considering the weighting changes in the rebased CPI, Maybank economist Brian Lee concluded that the sharp fall in January-February core inflation could not be attributed to the rebasement.
Overall – or headline – inflation cooled to 0.9 per cent year on year in February from 1.2 per cent in January as private transport inflation moderated, in addition to the fall in core inflation. It also came in lower than the Bloomberg poll forecast of 1.0 per cent.
MAS and MTI said Singapore’s imported inflation is expected to remain moderate, reflecting favourable supply projections for key food commodity markets and forecasts of a decline in global oil prices.
“While an escalation of trade frictions could be inflationary for some economies, their impact on Singapore’s import prices is likely to be offset by the disinflationary drags exerted by weaker global demand,” they said.
But MAS and MTI also warned that the inflation outlook “remains subject to heightened uncertainties in the external environment”.
DBS Bank senior economist Chua Han Teng and UOB associate economist Jester Koh cautioned that an escalating global trade war could result in weaker global demand, putting downward pressure on Singapore inflation.
“Should tariffs and trade tensions continue to escalate, deflationary risks could surface due to the effects of weaker global demand,” Mr Koh said.
MAS and MTI on March 24 kept unchanged its forecast for full-year core inflation at 1 per cent to 2 per cent, with the same for overall inflation at 1.5 per cent to 2.5 per cent.
UOB’s Mr Koh said the bank has lowered further its 2025 average core inflation forecast to 1 per cent, from 1.3 per cent previously, but maintained its overall inflation forecast at 1.3 per cent.
Ms Selena Ling, chief economist and head of global markets research and strategy at OCBC Bank, said the slower inflation and downside risks to economic growth give MAS room to ease monetary policy again.
Such considerations prompted MAS in January to ease its policy stance to favour a more gradual appreciation of the Singapore dollar – its first such move since 2020. The central bank’s next policy review is in April.
Looking at the February inflation data, electricity and gas prices dropped 3.1 per cent in February, after falling 2.9 per cent in January, due to a larger drop in electricity tariffs and a decline in gas prices.
The cost of retail and other goods fell 0.4 per cent in February, after shrinking 0.6 per cent in January. This drop was led by smaller declines in the prices of clothing, footwear, and furniture and furnishings.
Private transport costs rose at a slower pace of 1.6 per cent in February due to smaller increases in car and petrol prices, from 2.8 per cent in January. Food inflation moderated to 1 per cent in February from 1.5 per cent the previous month, as the pace of increase in the prices of non-cooked food and prepared meals slowed.
Services inflation eased to 0.8 per cent in February from 1 per cent in January. This was largely due to lower airfares and a steeper decline in holiday expenses.
Accommodation inflation remained unchanged in February from 1.6 per cent in January. This was because smaller increases in housing rents were offset by larger increases in housing maintenance and repair costs.