Core inflation in Singapore expected to stay elevated before falling in Q4: MAS

Consumer prices likely to keep catching up with higher costs for some goods, services

- Sue-Ann Tan

Core inflation in Singapore is expected to stay around 3 per cent in the near term, before "falling more discernibly" in the fourth quarter of 2024 and into 2025, the central bank said on April 26.

Consumer prices are likely to continue catching up with the higher cost levels in some goods and services for a while, the Monetary Authority of Singapore (MAS) said. This includes the step-up in water prices in April.

Hence, in the near term, core inflation which excludes accommodation and private transport costs will remain around current elevated levels. However, as the pass-through of accumulated costs to consumer prices progresses through the year, core inflation is projected to ease more meaningfully, MAS said in its macroeconomic review. But it cautioned that inflation could also turn out to be stronger than anticipated due to global shocks to supply and demand.

For 2024 as a whole, MAS maintained its forecast for core inflation and headline inflation to average at 2.5 per cent to 3.5 per cent. Excluding the transitory effects of the increases in goods and services tax (GST), core and headline inflation are expected to come in at 1.5 per cent to 2.5 per cent.

MAS noted that the GST hike to 9 per cent has likely been fully passed through to most consumer prices as at March. While some residual pass-through remains due to some retailers' choice to temporarily absorb the GST increase until later in the year, it is unlikely to raise inflation significantly in the upcoming months, it said.