Singapore’s core Consumer Price Index (CPI) unexpectedly declined in January, driven by lower education and holiday prices, according to UOB Global Economics and Markets Research. The core CPI fell by 0.3% month-on-month, contrasting with a 0.4% rise in December, and registered a 1.0% year-on-year increase, falling short of Bloomberg’s 1.5% estimate and UOB’s 1.6% prediction.
The decline in core inflation was primarily attributed to a significant drop in education costs, which fell by 2.28% in January. This decrease was partly due to the reduction in childcare fee caps for Anchor Operator and Partner Operator schools, effective from 1 January 2026. Additionally, recreation, sport, and culture expenses saw a third consecutive monthly decline, influenced by reduced hotel, chalet, and package holiday costs. Airfares also experienced a notable pullback, decreasing by 4.2% month-on-month.
The Monetary Authority of Singapore (MAS) anticipates further normalisation in core inflation, with an updated projection range of 1.0–2.0% for 2026. MAS remains confident that imported costs will remain contained, and subdued producer prices in Asia will limit inflationary pressures. The statement also highlighted the potential for sustained productivity growth, which could offset wage pressures and maintain measured services and goods inflation.
UOB maintains its 2026 core and headline inflation forecasts at 1.5% and expects MAS to adjust the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) policy band in April 2026. This adjustment aims to align the S$REER more closely with equilibrium levels, rather than initiating a series of tightening measures.
