Core inflation to hit 1.5% as domestic demand accelerates

Price pressures are likely to rise to around 1.4–1.5% in Q1.

Singapore’s headline and core inflation are expected to edge higher to 1.5% in 2026, supported by favourable economic conditions, private consumption trends, and fluctuations in global commodity prices

Price pressures are likely to rise to around 1.4–1.5% year-on-year (YoY) in the first quarter of the year (Q1), driven by higher consumption during the festive season and ongoing government stimulus measures, according to an RHB report.

Private consumption growth is expected to accelerate to about 5.5% YoY in Q1, up from 4.5% in the previous quarter, supported by stable external demand due to strong manufacturing activity and outward-oriented services.

“These conditions suggest that inflationary pressures will remain supported by sustained domestic demand,” said Barnabas Gan, Group Chief Economist & Head of Market Research, RHB Bank.

In a separate report, UOB said inflation risks are tilted slightly to the upside, as reduced ‘certificate of entitlement’ supply between February and April could push up vehicle costs.

“We have also incorporated the announced 3% decline in household electricity tariffs for Q1 2026 into our projections,” it added.

However, Nomura forecast a steeper rise in core inflation to 2.1%, citing stronger underlying momentum and a positive output gap.

“We see signs of the MAS turning more vigilant on the inflation outlook and expect it to revise up its 2026 core inflation forecast to 1-2% from 0.5-1.5% on 29 January,” it added. The bank said inflation pressures had picked up meaningfully in late 2025.

December’s headline and core consumer price index (CPI) remained unchanged at 1.2% YoY from the previous two months. For 2025, the headline and core prices averaged at 0.9% and 0.7%, respectively.

UOB said December’s inflation momentum was primarily driven by a surge in airfares and package holidays, which is unlikely to persist. Airfares rose 10.4% month-on-month, alongside higher prices for clothing, food, and recreation services.

However, price pressures remain contained, with only 22.9% of CPI basket items recording inflation above 2%.