Singapore’s core inflation rate for May remained flat month-on-month, leading UOB Global Economics and Markets Research to adjust its forecast, now anticipating no further tightening by the Monetary Authority of Singapore (MAS) for the remainder of 2026. The core Consumer Price Index (CPI) showed a 1.4% year-on-year increase, falling short of both Bloomberg’s and UOB’s 1.6% forecast.
The subdued inflation was attributed to declines in sectors such as information and communication, and transport services, with cheaper internet and telecommunication services, and a slight dip in airfares. Despite the energy price shock impacting petrol and utilities, its broader effect on core inflation was less pronounced, indicating weaker pricing power among firms amidst uncertain demand.
UOB maintains its 2026 headline and core inflation forecasts at 2.2% and 1.9%, respectively, with no anticipated upside risks due to recent softening in energy prices. The bank expects MAS to maintain its current Singapore Dollar Nominal Effective Exchange Rate (S$NEER) slope setting of 1.0% per annum through 2026 and into 2027. However, there remains a 30% risk of a 50 basis point slope steepening later in the year if imported inflation pressures rise or if geopolitical tensions in the Middle East escalate.
The labour market showed signs of slack, with increased redundancies and declining recruitment and resignation rates, potentially dampening inflationary pressures. UOB’s analysis suggests that core inflation may peak around August to September 2026 before gradually moderating.
