In July, the consumer price index (CPI) of Singapore experienced a year-on-year increase of 2.4%, as reported by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry. This marks a slight decline of 0.3% from the previous month, June. Concurrently, Singapore’s core CPI saw a rise of 2.5% on a year-on-year basis.
This represents a cooling trend from a 2.9% gain in June. On a month-to-month basis, the core CPI experienced a marginal decline of 0.1%. The observed moderation in core CPI suggests a broader cooling of prices across all categories classified under the core CPI, according to MAS. Additionally, the agency highlighted that services inflation eased primarily due to a slower rate of increase in holiday-related expenses.
Accommodation inflation also showed signs of moderation as housing rents grew at a less accelerated pace. Furthermore, food inflation exhibited a slight decrease, driven by smaller price increases in both non-cooked food and food services, confirming the report from MAS. Looking ahead, the MAS has forecasted a reduction in inflation levels throughout Singapore.
For 2024 as a whole, core inflation is anticipated to average between 2.5% to 3.5%, while the overall CPI inflation for all items is projected to range from 2.0% to 3.0%. Nonetheless, if the temporary impact of the recent 1% boost in the goods and services tax (GST) rate to 9% is excluded, both core inflation and CPI-all items inflation are expected to settle between 1.5% to 2.5%.
This is significant as it indicates a potential return to a more stable inflation rate. Another factor contributing to the inflation narrative is the strength of the Singapore dollar. The MAS asserted that a robust currency will help to mitigate imported inflation in the foreseeable future. Alongside this, a deceleration in unit labor cost increases is expected to further ease inflationary pressures. It’s important to note that, in contrast to numerous central banks which maintain explicit inflation targets, the MAS operates without such measures.
However, the central bank's literature suggests that a core inflation rate of just below 2% aligns closely with its historical average, maintaining price stability across the economy. This strategic approach allows the MAS to navigate Singapore's unique economic landscape effectively, ensuring that inflation remains manageable while promoting overall financial stability..