[SINGAPORE] Singapore’s core inflation came in higher than expected in April, driven by higher food and services prices, while headline inflation stood pat, data from the Department of Statistics showed on Friday (May 23).
April’s core inflation, which excludes accommodation and private transport, rose to 0.7 per cent. This was marginally higher than March’s 0.5 per cent and the median forecast of 0.5 per cent by private-sector economists polled by Bloomberg.
Headline inflation was unchanged at 0.9 per cent – higher than economists’ median forecast of 0.8 per cent.
They noted that though trade conflicts could be inflationary for some economies, the impact on Singapore’s import prices is likely to be more than offset by the disinflationary drags from weaker global demand.
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On the domestic front, unit labour costs are projected to rise gradually, while enhanced government subsidies for essential services will continue to dampen services inflation.
Taking these factors into account, MAS and MTI maintained the full-year forecast range for core and headline inflation at 0.5 to 1.5 per cent, adding that risks to inflation are “tilted towards the downside, given heightened uncertainties in the external environment”. MAS lowered the inflation forecast range on Apr 14, when it eased monetary policy settings for the second time in a row.
Less urgency to ease
Several economists are not ruling out a loosening of monetary policy in July, though they see less urgency for MAS to act.
OCBC chief economist Selena Ling pointed out that MAS’ inflation outlook is largely the same as the previous month, with no change to the official forecast range.
“As such, there is no urgency per se to ease monetary policy immediately after the January and April moves,” she noted.
But she added that the window “may still be open” should core inflation drop further and if global trade tensions re-escalate, resulting in a deterioration of global and domestic economic conditions.
Similarly, Barclays analysts Brian Tan and Liu Hongying believe that there is “less urgency” for MAS to ease monetary policy.
But they maintained their base case for the slope of the Singapore dollar nominal effective exchange rate policy band to be lowered to neutral in July, “with a risk of delay to October”.
“We believe… MAS will look through the impact of the administered price adjustments and view underlying demand-pull conditions as still soft. Coupled with its assessment that the output gap is entering negative territory, this should still justify a zero slope.”
That said, they expect that “an optically more stable core inflation path, even if supported by administered price adjustments” could still reduce pressure on MAS to ease policy, raising the risk of a delay in easing.
Citing MAS’ position that risks to inflation are tilted to the downside, Standard Chartered’s chief economist for Asean and South Asia Edward Lee expects MAS’ next move, if any, to be an easing.
But he added that April’s inflation data supports the bank’s on-hold call for July.
In contrast, Maybank economists Chua Hak Bin and Brian Lee expect MAS to maintain its policy stance come July and October.
They said: The April inflation data does not change the picture of a benign inflation outlook, while near-term recession risks are abating on the US-China trade truce and export front-loading.”
Economists also maintained their 2025 core inflation forecasts, which ranged between 0.5 per cent and 1.2 per cent.
At the lower end of the range was Maybank’s Chua and Lee, whose full-year core inflation forecast stood at 0.5 per cent and headline inflation forecast at 0.8 per cent.
They expect inflation to remain low, noting that import prices are likely to fall “amid soft global demand and displacement of China’s excess capacity”; lower imported costs from a stronger Singdollar; as well as cautious local consumer demand that will limit price hikes.
Barclays’ Tan and Liu kept their core inflation forecast at 0.7 per cent for 2025 and 1.1 per cent for 2026, but lowered headline inflation to 0.8 per cent for both 2025 and 2026.
Likewise, UOB associate economist Jester Koh kept his full-year core inflation forecast at 0.7 per cent, noting “risks tilted towards the downside on weaker external demand, in addition to possible rerouting of excess supply from China into Asean”.
Should weakness in core inflation momentum persist, there is also a likelihood of full-year core inflation undershooting MAS’ forecast range of 0.5 per cent to 1.5 per cent, he added.
Meanwhile, OCBC’s Ling maintained her full-year core inflation forecast of 1.2 per cent.
This is on the assumption that core inflation may inch higher over the course of this year and that the first quarter’s low levels were due to earlier 2024 Goods and Services Tax hike effects, she explained.
Though March’s core inflation reading came in at a “very dovish” 0.5 per cent, Ling said, April’s bump-up to 0.7 per cent “should not be too alarming” on account of current heightened tariff uncertainties in the external environment.
“Given the lack of clarity on tariffs, even with the ongoing trade negotiations, especially pertaining to the eventual outcome of the 90-day trade truce with China, the disinflation path is likely still bumpy.”
Key CPI categories
In April, higher inflation in services and food was offset by lower inflation in the categories of accommodation, retail and other goods, and private transport.
Services inflation rose to 1.1 per cent, from 0.6 per cent in March, due to a larger increase in the cost of health insurance and a smaller decline in airfares.
Food inflation edged up to 1.4 per cent, from 1.3 per cent the previous month, as the prices of non-cooked food rose at a quicker pace.
Electricity and gas inflation was unchanged, as electricity and gas tariffs declined at a similar pace in April and March.
Accommodation inflation moderated to 1.1 per cent, from 1.4 per cent in March, as a result of smaller increases in housing rents and maintenance and repair costs.
Private transport inflation eased to 1.3 per cent, from 2.1 per cent the month prior, due to a smaller increase in car prices and a larger decline in petrol prices.
On the other hand, retail and other goods prices fell at a faster pace to minus 1.2 per cent in April, compared to minus 0.5 per cent in March.
This was despite the increase in water prices and was attributed to a decline in clothing and footwear prices, as well as a sharper drop in the cost of medicines and health products.
