Singapore’s core inflation rate dropped to 0.6% year-on-year in February 2025, down from 0.8% in January, according to UOB Global Economics and Markets Research. This figure fell short of both Bloomberg’s median estimate of 0.7% and UOB’s own forecast of 0.8%. The decline was widespread, with categories such as miscellaneous goods and services, food, and recreation, sport and culture all showing lower year-on-year readings.
The persistent weakness in core inflation momentum suggests that the full-year average may fall below the Monetary Authority of Singapore’s (MAS) forecast range of 1.0-2.0%. The share of items in the Consumer Price Index (CPI) basket with inflation above 2% decreased to 31.2% in February, indicating a continued easing of price pressures.
UOB’s report highlights that Singapore’s labour market remains stable, although firms are becoming more cautious in hiring, particularly in trade-related sectors, due to escalating trade tensions and tariffs. The government’s upskilling initiatives are expected to enhance labour productivity, helping to mitigate cost pressures.
The MAS is likely to consider further monetary policy easing in its April 2025 Monetary Policy Statement (MPS). UOB anticipates a slight reduction in the Singapore dollar nominal effective exchange rate (S$NEER) policy band slope to 0.5% per annum from 1.0%. This adjustment would align with the MAS’s historical pattern of easing during periods of declining core inflation forecasts.
In conclusion, Singapore’s softening inflation and external uncertainties may prompt the MAS to adjust its monetary policy stance, potentially easing further to support economic stability.
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