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Singapore inflation rate: Where to next as core inflation drops for the first time in 8 months in October?

By Fitri Wulandari

Edited by Vanessa Kintu

14:35, 29 November 2022

Panorama of Singapore at the marina at dusk.
The Monetary Authority of Singapore is the country’s central bank and responsible for measuring inflation.

Price pressures in Singapore eased in October, the first decline since February 2022, driven by smaller increases in prices of energy and retail. According to the Monetary Authority of Singapore (MAS), core inflation reached an annual rate of 5.1% in October, cooling from 5.3% in September and matching with the rate in August.

Headline inflation also pulled back to 6.7% in October, from 7.5% in August and September. 

With major economies set to slow next year, supply constraints are projected to keep commodity prices elevated. Additionally, the US Federal Reserve (Fed) has indicated it could slow the pace of interest rate hikes. What is the outlook for Singapore’s inflation rate? 

What is inflation and how is it measured in Singapore?

Inflation can be defined as a steady rise in product and service prices over a specific time frame. Price increases in a basket of chosen goods and services are typically expressed as percentage increases. Additionally, it reflects the decline in the purchasing power of money.

A decline in purchasing power can curtail economic growth.

Singapore’s Department of Statistics calculates the monthly Consumer Price Index (CPI) inflation for all items. The CPI only covers consumption expenditure by resident households – either Singapore citizens or permanent residents.

The CPI basket contains 6,800 brands, classified into 10 main expenditure divisions as follows:

  1. Food

  2. Clothing and footwear

  3. Housing and utilities

  4. Household durables and services

  5. Health care

  6. Transport

  7. Communication 

  8. Recreation and culture

  9. Education

  10. Miscellaneous goods and services 

The total number of outlets selected for pricing is about 4,200.

Singapore’s central bank, the MAS, measures core inflation, which excludes accommodation and private transport. 

The MAS does not set an explicit inflation target. It believes core inflation of less than 2% is consistent with overall price stability in the economy.

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Singapore inflation rate: Historical context

Singapore inflation rate 5-year historical chartLooking at Singapore’s inflation rate history, MAS core inflation and CPI‐all items inflation recorded at -0.2% for overall 2020 on compared to 1.0% and 0.6% in 2019. Lower food inflation and a decline in services costs during the Covid-19 pandemic had caused a decline in prices, or deflation

Inflation started to climb in 2021 amid the rising cost of imports and labour,  and recovery in economic activity with the gradual lifting of Covid-19 restrictions.

MAS core inflation crossed the 2% mark in December 2021, up from -0.2% in January 2021. The all-item inflation rate in Singapore averaged 2.3% year-over-year (YOY) in 2021, while MAS core inflation averaged 0.9%, according to Singapore Department of Statistics data

Singapore’s inflation rate continued to pick up in 2022. In January, MAS core inflation gained 2.4%, driven by higher inflation for food and electricity as well as gas. However, all-items inflation remained unchanged at 4% from December 2021. 

The pace of inflation quickened in the second quarter as surging global commodity prices and renewed supply chain disruptions caused by Russia’s invasion of Ukraine intensified imported inflationary pressures. 

On the domestic front, persistently tight labour markets supported a firm pace of wage increases, contributing to the high inflation rate. CPI-All Items advanced to 5.4% in March, while MAS core inflation hit 2.9%, compared to 4.3% and 2.2%, respectively, in February. 

The inflation rate continued to climb in Q3, with MAS core inflation hitting 5.3% in September, from 5.1% in August, the steepest rise since November 2008. CPI all-Items inflation remained at a 14-year high of 7.5% in September, unchanged from August. Transportation costs climbed at the fastest rate, increasing 19% YOY, according to data from Singapore’s Department of Statistics

In its October’s monetary policy statement, the MAS attributed rising inflation to increased import and domestic costs as a result of strong demand. Rising global energy and agriculture costs pushed up electricity and gas.

In October, the inflation rate in Singapore declined, with MAS core inflation returning to the August level of 5.1%. CPI-All Items was at 6.7%. 

Jefferies’ analysts Sean Darby, Kenneth Chan and Equity Research Team wrote in a note on 22 November:

“The combination of post Covid reopening, booming tourist and business arrivals, robust capital inflows and a huge rise in business service company formation has squeezed the output gap from all directions – labour, housing and office space. There are no signs of cooling.”

The MAS tightening monetary policy

The surging inflation has forced the MAS to step up its monetary policy to maintain the Singapore dollar’s (SGD) strength against other currencies. 

Unlike other central banks, the MAS does not use interest rates to keep inflation in check. Instead, it manages the Singapore dollar (SGD) movement against a trade-weighted basket of currencies of the country’s main trading partners, which the MAS does not disclose, through a complex mixed of parameters. 


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This is because Singapore’s small and open economy depends on imports to meet demand, meaning that the exchange rate has more impact on inflation than interest rates. The Southeast Asian nation spends roughly 40 cents of every dollar on imports, according to the MAS. The country’s gross exports and imports of goods and services account for more than 300% of its gross domestic products (GDP).

The central bank establishes a defined ‘policy band’ within which the Singapore dollar or Sing appreciates or depreciates against a basket of currencies. When necessary, the MAS will step in to ensure the SGD does not deviate from the policy band.

Nicholas Mappa, Senior Economist at ING Group, wrote on 23 November:

“The inflation reading also validates MAS’ view that the recent string of aggressive tightening would feed through the economy and lower price pressures over the next few months. Despite the apparent turn in inflation, MAS will likely remain vigilant, maintaining its hawkish tone while monitoring the trajectory of core inflation.”

Since April 2022, Singapore’s central bank has adjusted the volatility of foreign exchange market twice – in July and October – while maintaining the rate of the SGD appreciation at 1.5%. 

Factors driving Singapore inflation

Let’s examine what factors contributed to the rising inflation before looking at analysts’ Singapore inflation predictions.

Imported inflation to remain elevated

According to the MAS, the rise in prices of discretionary goods and services amid robust demand aided the pass-through of higher imported and domestic costs. Inflation in electricity and gas, as well as non-cooked food, also rose, reflecting the effects of a YOY increase.

The MAS expected imported inflation across a range of goods and services to remain significant for some time. 

“Demand conditions in major economies have softened while supply chain frictions have continued to ease. Prices of energy and food commodities have come off the peaks reached earlier in the year but remain high given ongoing supply constraints. In addition, labour markets in major advanced economies are still tight, keeping wage pressures strong,” the bank said. 

Tight labour market to push inflation rate

Lingering tight labour markets have contributed to fuelling inflation from wages. In September, Singapore’s unemployment rate dropped to 2%, down from 2.2% in March and 2.6% a year earlier. As the economy has improved, businesses are competing for talent by offering higher wages. 

For a long time, the country has relied on foreign talent, and the slow return of foreign workers has tightened the labour market even more. SEB Group estimated that while non-resident labour flows rose to about 1.306 million in 2022, they remained well below the 1.427 million recorded in 2019.

“On the domestic front, unit labour costs will increase further in the near term alongside robust wage growth,” MAS said. 

MAS monetary tightening boost SGD appreciation

Singapore dollar to US dollar live chart

The Singapore dollar has so far bucked the depreciation trend in global currencies as the Fed’s aggressive rate hike strengthened the US dollar (USD). Analysts expected that the MAS’ recent aggressive tightening could boost SGD against most of its trading partners’ currency. 

As of 29 November, the USD/SGD currency pair traded around 1.37 a dollar, gaining 0.59% YOY, reflecting a stronger US dollar. 

The currency pair beat performance of its Asian peers, including the US dollar to Japanese yen (USD/JPY), which has advanced 22.16% YOY, and the US dollar to Chinese yuan (USD/CNY), which has climbed 12.64%.

The Singapore dollar, however, has strengthened against the euro. As of 29 November, the EUR/SGD exchange rate was 1.42, falling 7.93% YOY. 

Singapore inflation rate forecast: 2022, 2023 and beyond

The Monetary Authority of Singapore predicted core inflation to average 4% in 2022 while CPI-All Items inflation was expected at around 6%. 

The Singapore inflation rate forecast for 2023 was expected to average 3.5% to 4.5%, considering all factors including GST increase, according to the MAS. The central bank saw headline inflation at 5.5% to 6.5% in 2023.

“MAS core inflation is projected to stay elevated in the next few quarters before slowing more discernibly in H2 2023 as the current tightness in the domestic labour market eases and global inflation moderates. There are upside risks to the inflation outlook, including from fresh shocks to global commodity prices and more persistent-than-expected external inflation,” the MAS said in its inflation report

Economists and analysts polled in the MAS’ Survey of Professional Forecasters in September raised their core inflation forecast for 2022 to 3.8%, from 3.4% in June. They also increased the CPI inflation estimate for 2022 to 5.7% from the previous 5%.

As of 16 November, ING Group’s Singapore inflation forecast expected the pace of price rise to reach 5.7% in Q4 2022, before gradually easing to 3.5% by Q4 2023. Overall, Singapore expected inflation was projected to average 4% in 2023, decelerating to 3.4% in 2024 and 3% in 2025, based on the Dutch lender’s estimates. 

Bank of America (BofA) Global Research on 23 November Singapore’s inflation predictions projected MAS core inflation and headline inflation to average 4.2% and 5.1%, respectively.

Mohamed Faiz Nagutha, Asia and ASEAN economist at BofA’s Merril Lynch Singapore, wrote on 23 November:

“Nevertheless, we keep our full-year forecasts unchanged as price pressures could potentially pick up again going into the year-end festivities and school holidays. Given that inflation still remains elevated and continues to broaden out, MAS will not be declaring it a success anytime soon in our view.”

Final thoughts on Singapore inflation

Analysts mentioned in this article expected inflation in Singapore to remain elevated in the short term, before gradually decelerating in 2023 onwards.

When researching Singapore’s inflation forecast, keep in mind that analysts’ estimates can be inaccurate. They should not be used to replace your own research. Always do your own research before trading. And never trade money that you cannot afford to lose.


What is the current inflation rate in Singapore?

The Monetary Authority Singapore (MAS) core inflation stood at 5.1% and the Consumer Prices Index (CPI) All-Items grew at an annual rate of 6.7% in October.

Has inflation been going up or down in Singapore?

Singapore’s inflation rate has cooled in October, but remains above the central bank’s benchmark of 2% core inflation.

Why is inflation so high right now?

Inflation in Singapore is currently high due to rising import and domestic costs, as well as a tight labour market, which fuelled higher wage growth.

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