Singapore’s core inflation rate experienced a significant decline to 0.8% year-on-year (YoY) in January 2025, down from a revised 1.7% in December, according to latest government statistics.
This decrease is attributed to the recent rebasing of the Consumer Price Index (CPI), which altered the composition of the CPI basket, resulting in broad-based disinflation across key categories such as food, clothing and footwear, health, and recreation, sport and culture.
The rebasing notably increased the weight of accommodation, which is excluded from the core CPI, by 4.59 percentage points to 26.56%. This adjustment reflects a surge in both actual and imputed rentals for housing. Additionally, the weight of healthcare rose by 3.57 percentage points to 10.08%, aligning with an ageing population where the percentage of citizens aged 65 and above has increased from 16% in 2019 to 19.9% in 2024.
Conversely, the weight of private transport saw a significant reduction, dropping from 12.21% in 2019 to 9.06% in 2024. This change is primarily due to lower total spending on motor cars, despite rising prices driven by an uptrend in Certificate of Entitlement (COE) premiums and other car-related taxes.
With the subdued core and headline inflation readings, UOB Global Economics and Markets Research has adjusted its full-year inflation forecast to 1.3% YoY for both core and headline inflation in 2025, down from previous estimates of 1.7% YoY. The Monetary Authority of Singapore (MAS) is expected to maintain its current Singapore Dollar Nominal Effective Exchange Rate (S$NEER) settings for the remainder of the year, although further easing could occur if core inflation continues to decelerate.
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