In March 2025, Singapore's inflation rates have shown signs of significant easing, indicating that the country may face a more favorable economic landscape moving forward. According to data released by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI), the core inflation rate dropped to a mere 0.6% in February 2025, down from 0.8% in January 2025. This marks the lowest core inflation level seen since June 2021.
Additionally, the overall inflation rate, which includes accommodation and private transportation costs, also decreased to 0.9% in February, a decline from 1.2% in the previous month. This reduction in inflation rates points toward a promising trend in Singapore’s economic environment, with core and overall inflation hitting their lowest levels since February 2021.
The consumer price index (CPI) figures reflect a monthly increase of just 0.1% for the core CPI, while the overall CPI rose by 0.8%. It appears that the softer inflation rates are attributed to a general slowdown in price rises across various categories of goods and services. For instance, food inflation eased from 1.5% in January to 1.0% in February, while service-related inflation fell from 1.0% to 0.8%. Meanwhile, inflation concerning electricity and natural gas transitioned from a contraction of 2.9% to a more significant contraction of 3.1%, and retail goods experienced a contraction of 0.4%, an improvement from the previous 0.6% contraction.
Despite the stable core inflation rate of 1.6% for accommodation, there was a noticeable decrease in inflation triggered by private transportation costs, which fell from 2.8% in January to 1.6%. The MAS and MTI have indicated a low expectation for import inflation, suggesting that domestic conditions are supportive of easing inflation pressures.
On the future of monetary policy, analysts predict that MAS might consider further easing policies in light of this positive trend. Economist Cai Han Ting expressed his outlook, stating, "Cai Han Ting predicts a core inflation of 1.0% for 2025," which aligns with the MAS's forecast of core inflation remaining between 1.0% and 2.0% this year.
However, the economists have voiced concerns regarding external factors that may influence inflation and, consequently, the MAS's monetary decisions. For instance, as the US government prepares to implement reciprocal tariffs on April 2, 2025, this may introduce complexities for Singapore's economy. Li Weixiong, Chief Economist, noted, "Due to increased uncertainty in inflation, MAS may remain cautious before implementing further easing policies," reflecting a more watchful approach from the monetary authority.
Despite these external uncertainties, Lin Xiuxin, Chief Economist, underscored that Singapore could still benefit from easing its monetary modalities, stating, "Singapore still has room to ease its monetary policy, as the core inflation rate is declining and is far below the MAS’s forecast of 1% to 2% for the year." This indicates that Singapore might maintain flexibility in its economic policy, adapting to both international developments and domestic needs.
As we look forward, MAS and MTI seem cautiously optimistic about the economic landscape, despite acknowledging the potential risks. The projected fiscal measures from the government are expected to contribute around 0.9% to economic growth. These calculations could afford MAS more time to observe the unfolding economic scenario before responding to possible disparities created by external pressures.
In summary, with inflation pressures softening, economists conclude that although external uncertainties loom, Singapore has room to navigate its monetary policies effectively. Whether MAS decides to adopt a wait-and-see approach or takes proactive steps to soften its monetary policy will depend on the unfolding economic indicators in the upcoming months.
