Will inflation finally see improvement by year-end?

It is expected to average between -0.5% and 0.9%.

Singapore's inflation is set to remain stuck in the negative level, with consumer price index (CPI) inflation still on the downtrend.

According to DBS Research, CPI inflation for August is expected to decline 0.5% YoY. This will be up from -0.7% in the past two months and from the trough of -1.6% in May.

"Overall, inflation is expected to average between -0.5% and 0.9% in 2016 and 2017, respectively. It will remain stuck in negative territory till the end of the year or early 2017," DBS said.

What will remain the key drag amid low energy prices is the housing and utilities segment. On the other hand, transport inflation will become less negative on account of the higher certificate of entitlement (COE) premiums.

"The easing in car loan regulations announced by the Monetary Authority of Singapore (MAS) earlier on has brought about an increase in car purchases and henceforth, upward adjustments in the COE premiums. That in turn has lifted the private transport CPI index given the strong influence of COE premiums on the index," DBS noted.

On the bright side, the DBS forecast core inflation to stay positive and possible creep higher.

"This will mean less room for further monetary easing in at the October monetary policy review," the firm concluded.