Singapore inflation to stay within 1.5-2.5% range in 2025: analysts

Whilst RHB expects no immediate changes, UOB suggests the possibility of a 50-basis point reduction in the S$NEER slope.

Singapore's inflation is projected to remain within the official forecast range of 1.5-2.5% in 2025 supported by higher consumption spending and potential government support measures, but downside risks persist from global economic uncertainties and geopolitical tensions.

UOB noted that core inflation rebounded by 0.5% MoM in December, resulting in a 1.8% YoY increase, slightly above market expectations. The recent uptick was primarily driven by rising food inflation, which accounts for 21.1% of the overall CPI basket.

UOB highlighted that the Progressive Wage Model, which mandates wage increases in the food services sector, is expected to put continued upward pressure on food prices in 2025.

The food services sector, which carries a 14.3% weight in the overall CPI basket, is experiencing cost pressures due to higher labour costs under the PWM. Wage growth for cooks, waiters, and kitchen assistants is expected to rise further in March 2025, exacerbating inflationary pressures.

However, UOB noted the broader inflation trend remains subdued, with inflation momentum slowing compared to previous years.

Meanwhile, RHB projects Singapore’s inflation trajectory will be shaped by domestic and global factors. Increased consumer spending during festive periods, such as Chinese New Year could stimulate demand and add to inflationary pressures.

Both institutions agree that the Monetary Authority of Singapore (MAS) will likely maintain its current policies in the upcoming monetary policy review.

Whilst RHB expects no immediate changes, UOB suggests the possibility of a 50-basis point reduction in the S$NEER slope to accommodate potential external shocks. The MAS anticipates core inflation to average within the middle of its 1.5-2.5% forecast range for 2025.

Despite these inflationary pressures, both RHB and UOB maintain a cautiously optimistic outlook for Singapore’s inflation, with expectations of gradual easing supported by stable global commodity prices and controlled domestic costs.