Singapore’s inflationary landscape is evolving, with UOB Global Economics and Markets Research suggesting a potential shift in the Monetary Authority of Singapore’s (MAS) policy this October. The core Consumer Price Index (CPI) rose by 0.3% month-on-month in August, mirroring July’s increase, driven by higher electricity tariffs and a broadening of price pressures across various components.
Energy costs continue to impact the economy, with rising fuel prices affecting travel-related expenses and broader consumer costs. UOB now expects MAS to implement a “very slight” slope-steepening move, increasing the Singapore dollar nominal effective exchange rate (S$NEER) slope by 25 basis points to 1.5% per annum.
The August data revealed a 2.2% year-on-year increase in core inflation, up from 2.0% in July, aligning with consensus expectations. Travel-related components, such as airfares and transport services, saw significant monthly increases, reflecting the delayed impact of earlier petrol price surges.
Broader inflationary pressures are evident, with clothing and footwear prices jumping 1.8% month-on-month in August. The share of CPI basket items with price increases exceeding 2% rose to 43% in August, indicating a wider spread of inflationary pressures.
UOB’s forecast for core inflation in 2026 has been adjusted to 1.8%, up from 1.7%, with expectations of continued elevated levels into 2027. The potential policy adjustment by MAS aims to address these pressures whilst maintaining flexibility for future decisions. The upcoming decision is anticipated to be closely contested, with ongoing global energy supply disruptions and adverse weather conditions posing further risks to Singapore’s inflation outlook.
