Singapore’s core inflation rate fell to 0.6% year-on-year in May, marking the lowest level since 2021, according to recent data. The headline inflation rate also decreased to 0.8% year-on-year, aligning with Bloomberg’s consensus estimates. This decline is attributed to slower food inflation and reduced private transport costs, as Certificate of Entitlement (COE) premiums decreased across most categories.
Private transport inflation eased for the third consecutive month, reaching 1.1% year-on-year in May. This was driven by smaller increases in car prices and a decline in COE premiums, with Category A and B premiums dropping by 0.5% and 2.4%, respectively. The moderation in COE prices is likely due to buyer fatigue, anticipation of a larger COE quota, and a temporary pause in demand ahead of new car launches.
Despite the current dip, COE premiums remain historically high, suggesting that private transport inflation may persist at current levels unless there is a sustained decline in COE premiums and a significant softening in demand. The Monetary Authority of Singapore (MAS) has maintained its 2025 Consumer Price Index (CPI) forecast at 1.5% year-on-year, acknowledging potential upside risks from escalating geopolitical tensions in the Middle East.
Whilst global crude oil prices and food commodity prices are expected to remain stable, the inflation outlook could be influenced by these external factors. Nonetheless, the overall inflationary pressures are anticipated to remain contained, with the year-to-date CPI standing at 0.9% year-on-year, near the midpoint of MAS’s forecast range of 0.5% to 1.5% year-on-year.
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