Analyst maintains inflation outlook as Singapore prices ease in May

Year-to-date, headline and core inflation have risen by just 0.92% and 0.63%, respectively.

RHB Bank is maintaining its full-year 2025 inflation forecasts for Singapore at 1.6% for headline inflation and 1.1% for core inflation, despite recent signs of easing price pressures across key categories such as food and transport.

According to the latest report from RHB’s Global Economics & Market Strategy team, Singapore’s headline Consumer Price Index (CPI) eased to 0.8% YoY in May, whilst core inflation slowed to 0.6%, its lowest reading since February 2021. This was attributed to falling private transport costs and lower inflation for electricity and food.

Year-to-date, headline and core inflation have risen by just 0.92% and 0.63%, respectively.

Despite this moderation, RHB sees inflation risks as broadly balanced, pointing to both external threats and domestic headwinds that could shift the trajectory in either direction.

Geopolitical tensions in the Middle East, particularly involving the Iran-Israel conflict, have pushed oil prices higher, with Brent crude nearing US$81 per barrel. In a worst-case scenario involving a disruption of oil flows through the Strait of Hormuz, prices could spike to US$90, triggering what RHB describes as an "oil price shock."

At the same time, Singapore’s stronger Singapore dollar (S$NEER)—now trading 2.0% above its midpoint—has helped moderate imported inflation. The SGD has gained 5.44% year-to-date against a trade-weighted basket of currencies, outperforming regional peers like the Malaysian ringgit and Thai baht.

Domestically, inflation is expected to stay manageable due to weak demand-pull pressures, subdued consumption, and a likely technical recession in the first half of the year.

RHB projects a continued slowdown in GDP growth for Q2, with retail and tourism-related activity softening across ASEAN.

Given these conditions, the bank expects the Monetary Authority of Singapore (MAS) to maintain its current monetary policy stance at the upcoming July 2025 policy meeting.

However, MAS may opt to widen the policy band to ±3.0% from the current ±2.0%, whilst keeping the +0.5% appreciation slope. If global demand deteriorates further or trade tensions escalate, a flatter policy slope may be considered in subsequent reviews.