SINGAPORE (The Straits Times/ANN): Singapore’s core inflation unexpectedly eased in the first month of 2026, with analysts somewhat divided on how well-contained price pressures are and the likelihood of any monetary tightening.
Core inflation eased to 1 per cent in January from 1.2 per cent in December 2025, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) said on Feb 23. The measure excludes private transport and accommodation costs to better represent household expenses.
Analysts polled by Bloomberg had expected core inflation to rise to 1.5 per cent in January.
Overall – or headline – inflation in January rose to 1.4 per cent from 1.2 per cent in December due to higher accommodation inflation that more than offset lower core and private transport inflation. The reading was below the 1.6 per cent forecast in the Bloomberg poll.
DBS Bank senior economist Chua Han Teng noted that January’s core inflation fell to the lower bound of the unchanged official forecast range of 1 per cent to 2 per cent. But he said there could be a modest rebound in inflation in February, partly because of the Chinese New Year season.
But MAS will likely see little urgency to tighten monetary policy in the near term, he said, as imported price pressures remain restrained even as global oil prices rise amid increased geopolitical risk in the Middle East.
“Moreover, the downside uncertainty to Singapore’s economic growth from the new higher global US tariff of 15 per cent could pose a downside risk to inflation,” Mr Chua added.
When MAS tightens monetary policy, it allows for a faster appreciation of the Singapore dollar, a move which would help counter inflation.
OCBC Bank chief economist Selena Ling said that MAS will likely maintain the status quo at its April policy review as it observes a few more months of inflation data before committing to a tightening move.
She projected that first-quarter core inflation will average around 1.2 per cent year on year, with headline inflation at about 1.4 per cent.
But Maybank analysts Chua Hak Bin and Brian Lee warned of simmering inflation pressures and upside risks, including rising oil prices and surging memory chip prices from the AI boom, as well as a positive and widening output gap that may bolster demand-pull inflationary pressures.
“With gross domestic product growth likely to remain above trend in 2026, the output gap will likely widen and increase services and cost pressures,” they said. The output gap is an economic measure representing the difference between an economy’s actual output and its maximum potential output at full capacity.
Maybank’s Dr Chua and Mr Lee maintained their 2026 core inflation and headline inflation forecasts of 1.7 per cent and 1.6 per cent respectively.
“Our expectation remains for MAS to tighten monetary policy in April slightly to pre-empt a pick-up in inflationary pressures,” they added.
MAS and MTI said in their joint report on Feb 23 that Singapore’s imported costs should remain contained, as global crude oil prices are expected to remain lower while regional consumer price inflation should pick up modestly after their weak outturns in 2025.
They maintained their forecast for core inflation in 2026 to average 1 per cent to 2 per cent. The forecast was raised in January from between 0.5 per cent and 1.5 per cent previously.
MAS and MTI said the inflation outlook remains subject to uncertainties.
“Stronger-than-expected growth could bolster demand-pull inflationary pressures. Supply shocks, including those triggered by geopolitical developments, could also lift imported costs. Conversely, a large, discrete shock to growth from macroeconomic and financial stressors could dampen inflation,” said MAS and MTI.
In January, accommodation inflation picked up to 1.9 per cent from 0.3 per cent in December, owing to a larger increase in the cost of housing maintenance and repairs.
Prices of retail and other goods rose by 0.5 per cent, after being unchanged in December, primarily on account of an increase in the cost of other appliances for personal care.
Services inflation moderated at 1.5 per cent, from 1.9 per cent in December, led by a larger fall in airfares and a decline in general, vocational and higher education fees.
Electricity and gas inflation fell 4.2 per cent, unchanged from December, as electricity tariffs declined at a similar pace.
Private transport inflation eased to 2.7 per cent, from 3.7 per cent in December, owing to a smaller increase in car prices and a steeper decline in petrol prices.
Food inflation was unchanged at 1.2 per cent, as the prices of non-cooked food and food services rose at similar rates in January and December. -- The Straits Times/ANN
