Singapore's Core Inflation Hits Lowest Level Since 2021

Singapore's core inflation rate for August 2025 recorded a year-on-year increase of just 0.3%, marking the lowest level since February 2021. This figure was below the 0.5% anticipated by economists and down from 0.5% in July. The headline inflation rate also decreased to 0.5%, down from 0.6% in the previous month. The Monetary Authority of Singapore (MAS) attributed the easing of inflation primarily to a decline in services costs, including cheaper holiday expenses, airfares, and inpatient services. However, private transport costs rose, driven by increased car prices and a slower decline in petrol prices.

CNBCThe Straits TimesSingapore core inflation at 0.3% y/y in August, lowest in more than 4 yearsSingapore Inflation Update 2025: CPI Eases Again, Outlook Remains Modest Amid Balanced Risks

The MAS has maintained its full-year inflation forecast for 2025 at a range of 0.5% to 1.5%, a significant reduction from the 2.8% forecast for 2024. Analysts from UOB Global Economics & Markets Research and Nomura have revised their core inflation predictions downward, with UOB projecting a core inflation rate of 0.5% for 2025. Nomura anticipates a potential dip to as low as 0.1% in September before a gradual increase. The MAS's monetary policy, which focuses on guiding the Singapore dollar against a basket of currencies rather than adjusting interest rates, may see further easing in October.

Core inflation eases below expectations; banks revise 2025 outlook to 0.5%Singapore core inflation at 0.3% y/y in August, lowest in more than 4 yearsCNBCThe Straits TimesSingapore Inflation Update 2025: CPI Eases Again, Outlook Remains Modest Amid Balanced Risks

The moderation in core inflation was largely influenced by a significant decline in the services sector, where inflation fell to 0.4% in August from 0.7% in July. Notable decreases were observed in recreation and culture, which saw a decline of 3.0% year-on-year, and airfares, which dropped by 4.6%. In contrast, private transport inflation rose to 2.4%, reflecting higher Certificate of Entitlement (COE) premiums for vehicles. Accommodation inflation also eased slightly to 0.4%, attributed to a slower increase in housing rents.

The Straits Times

While some economists view the low inflation rates as a relief from previous years' price increases, others express caution. OCBC Bank's chief economist, Selena Ling, noted that the current low inflation could indicate a modest pullback in demand conditions, influenced by external economic headwinds and a softening local labor market. Additionally, there are concerns that geopolitical tensions and trade conflicts could introduce volatility into Singapore's inflation outlook.

The Straits Times

The MAS and the Ministry of Trade and Industry (MTI) have indicated that imported inflation is expected to remain moderate, with global crude oil prices and food commodity prices staying contained. They emphasized that government subsidies for essential services will continue to dampen inflationary pressures. However, economists warn that inflation may rise in the fourth quarter of 2025 due to factors such as increasing COE premiums and falling interest rates.

The Straits TimesSingapore Inflation Update 2025: CPI Eases Again, Outlook Remains Modest Amid Balanced RisksCNBCCore inflation eases below expectations; banks revise 2025 outlook to 0.5%

• “Recent export data, including an abrupt fall in non-oil domestic exports, suggest the payback from front-loading is already underway, adding to downside risks [for growth]” — Josh Gilbert, Market Analyst, eToro

CNBC

• “Consumer demand remains resilient despite economic uncertainty, cushioned by optimism from the rising stock market and property prices, as well as the Government’s CDC vouchers and other cost-of-living support,” — Chua Hak Bin, Maybank Economist

The Straits Times

• “She noted that the current low inflation situation points to a modest pullback in demand conditions given the softening in the local labour market and external headwinds, such as tariffs and the growth slowdown in major economies like the United States and China.” — Selena Ling, Chief Economist, OCBC Bank

The Straits Times

In summary, Singapore's inflation landscape is characterized by a significant easing in core inflation rates, driven by various sectoral dynamics and external economic factors. The MAS's cautious approach to monetary policy reflects the ongoing challenges and uncertainties in the global economic environment.

The Straits Times