Singapore's Inflation Declines, Raising Possibility of Further Policy Easing

In January 2025, Singapore's core inflation dropped to 0.8%, leading many to speculate that the Monetary Authority of Singapore (MAS) may ease its monetary policy again in April. Despite this decline, the official inflation forecasts for the year remain unchanged, with core inflation projected to stay between 1-2% and headline inflation between 1.5-2.5%.

Skyline of Singapore's bustling financial district at dusk

Factors Driving the Inflation Drop

January's data showed a significant reduction in both overall CPI (down 0.7%) and core CPI (down 0.2%). Economists were caught off guard by this drop, which was primarily driven by lower prices in electricity, gas, housing, and services. This broad decline in prices has fueled predictions that MAS might adjust its monetary policy in response.

Mixed Opinions on Future Policy Adjustments

Economists have differing views on whether MAS will continue to ease its policy in April. While some, like Maybank’s Chua and Lee, believe further adjustments are likely, others, such as UOB’s Jester Koh, expect MAS to keep its current policy unchanged throughout the year. Global economic factors, such as ongoing trade tensions, are influencing inflation projections, which remain relatively low.

Inflation Trends Across Different Sectors

The CPI data for January revealed mixed inflation trends across sectors. Housing and services inflation slowed, with smaller increases in rents and maintenance costs. However, private transport costs rose by 2.8% due to higher car prices. On the other hand, categories such as retail goods and electricity/gas saw negative inflation, contributing to the overall price decline.

Outlook: Modest Inflation with Caution

Inflation is expected to remain subdued in the coming months, with gradual wage increases and government subsidies helping to keep services inflation in check. Imported inflation is also expected to remain moderate, with stable food and oil prices. However, external uncertainties could lead to further policy adjustments as the year progresses.