Singapore’s core inflation rate rose to 3.6% in February 2024, which is the highest since July 2023. This was due to increased costs of healthcare and recreation goods and services. The core inflation rate doesn’t include private road transport and accommodation costs. It was higher than expected, with a 3.4% forecast by economists and 3.1% in January.
The headline consumer prices also rose to 3.4%, which was stronger than the 3.3% forecast in the poll and the 2.9% rise in January. This was mainly due to higher services and food inflation, partly reflecting seasonal effects associated with the Chinese New Year. The Trade Ministry and Monetary Authority of Singapore (MAS) expect core inflation to gradually moderate over the year as import cost pressures continue to decline and tightness in the domestic labour market eases. They anticipate both headline and core inflation to average between 2.5% to 3.5% for 2024.
Although inflation has slowed from its peak of 5.5% in January last year, it remains sticky amid slowing economic growth and an increase in goods and service tax by one-percentage point this year. The economy expanded 1.1% in 2023, moderating from the 3.8% in 2022. Singapore expects higher economic growth at 1% to 3% this year but warned of a mixed economic outlook due to geopolitical risks. MAS left monetary policy settings unchanged in its first review of 2024 and increased the frequency of its reviews from twice a year to quarterly starting this year. It is due to revisit monetary settings in April.
MAS and the Trade Ministry mentioned that the gradually strengthening S$ trade-weighted exchange rate should continue to temper Singapore’s imported inflation in the upcoming quarters.