Singapore’s core inflation edges up to 1.6% in June, slightly lower than forecasts

SINGAPORE - Singapore’s core inflation edged up in June, with higher energy costs expected to raise production and transport costs for a wider range of the country’s imported goods and services over time.

Core inflation – which excludes private transport and accommodation to better reflect household expenses – came in at 1.6 per cent in June, up from 1.4 per cent in May.

Economists polled by Bloomberg had forecast that core inflation would rise to 1.7 per cent.

Overall inflation was 1.9 per cent in June, up slightly from 1.8 per cent in May. This was due to higher accommodation inflation, in addition to the pickup in core inflation, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in a joint statement on July 23.

“A slower-than-expected resumption in global energy supplies or continued shortages in key intermediate inputs to regional supply chains could further raise imported costs for Singapore,” said the authorities

“However, downside risks are also present. A stronger-than-expected tightening in global financial conditions could lead to a slowdown in economic activity and thus lower inflation.”

For now, private transport inflation dipped from 8.6 per cent in May to 8.4 per cent in June because of a smaller increase in petrol prices.

Food inflation rose 0.3 percentage point to 2.1 per cent in June, from 1.8 per cent in May, as the prices of both non-cooked food and food services increased at a faster pace.

Retail and other goods inflation crept up to 1.7 per cent in June, from 1.6 per cent in May, on the back of larger increases in the prices of both furniture and other recreational goods.

Higher housing rents pushed accommodation inflation to 0.6 per cent in June, from 0.5 per cent in May.

Services inflation rose to 1.5 per cent in June, compared with 1.3 per cent in May, on account of larger increases in airfares and holiday expenses.

Electricity and gas prices fell by 2.9 per cent in June, compared with 3 per cent in May, due to a smaller decline in electricity prices.

Regulated electricity tariffs for each quarter are set based on the average natural gas prices in the first 2½ months of the preceding quarter, among other factors.

Hence, higher global energy prices over the period of April to mid-June 2026 will be reflected only in the regulated electricity tariff in the third quarter of 2026, starting from July.

MAS and MTI maintained their forecasts made in April that overall and core inflation will average 1.5 per cent to 2.5 per cent in 2026.

Zavier Wong, a market analyst at financial services company eToro, said June’s firmer inflation reading weakens the case for MAS to ease policy at its July monetary policy statement.

“The case for a hold had largely rested on May’s softer core inflation reading, which gave MAS room to stay on pause... June’s pickup squarely pushes against that,” he said.

Wong added that MAS and MTI had already signalled caution by leaving their full-year inflation forecasts unchanged after May’s softer reading, suggesting policymakers were not yet convinced that inflationary pressures had fully subsided.

Private transport inflation remained elevated at 8.4 per cent in June, reflecting the lagged pass-through of earlier oil price increases.

Although crude oil prices retreated after the mid-June ceasefire around the Strait of Hormuz, pump prices and transport fares typically take longer to adjust.

“That lag is now colliding with fresh complications... The disinflation MAS might have expected from June’s de-escalation was already overtaken by events before the ink dried,” Wong said, referring to the renewed surge in oil prices after the ceasefire broke down.

Edward Lee, chief economist and head of foreign exchange for ASEAN and South Asia at Standard Chartered, expects MAS to leave policy unchanged while maintaining a “tightening bias”.

“Escalating disruptions in the Strait of Hormuz and Red Sea have raised energy and freight costs, posing renewed upside risks to imported inflation,” he said.

Still, Lee noted that softer unit-labour costs and still-benign inflation breadth suggest domestic price pressures remain broadly contained.

“MAS is therefore likely to wait for greater clarity, with April’s tightening still working through the economy, before reacting to external price shocks,” he added.