Singapore’s core inflation drops; forecasts revised ahead of October review
Singapore's core inflation dropped to 0.3% in August, prompting lower forecasts and raising expectations of Monetary Authority of Singapore (MAS) easing. This softening can ease household budgets, though businesses may face tighter margins.
In August 2025, Singapore’s core inflation dropped to 0.3%, well below expectations and excluding volatile items like housing and transport. The sharp cooling prompted banks and financial institutions to revise the forecast downward.
Core inflation for the 2025 is now expected to land closer to 0.5%, below earlier forecasts. Ahead of the Monetary Authority of Singapore (MAS) October policy review, markets await signals on policy and inflation trends.
Core inflation eases to 0.3%
Core inflation is watched closely because it reflects underlying price pressures less distorted by volatile items. It gives a better sense of whether prices are steadily rising across most everyday goods and services. If core inflation marks remain weak, it gives the authority leeway to loosen monetary conditions. It is likely to affect wages, consumer confidence and business planning.
MAS policy expectations and market impact
MAS has several tools at its disposal, mostly via managing Singapore's dollar exchange rate rather than just interest rates. As a small, open economy, Singapore relies heavily on the exchange rate to influence domestic prices and trade. MAS might soften its policy stance by delaying further appreciation of the Singapore dollar to prevent cheaper imports. If inflation remains weak, the October review could signal a shift toward easing.
Impacts on households, businesses and markets
Slower inflation eases household budgets but challenges businesses, while markets may adjust to a more dovish outlook.
Households: Slower price rises for goods and services. It gives a breathing space. Low inflation may limit wage increases, while cheaper borrowing costs could ease loan and mortgage repayments.
Businesses: With low inflation, many companies might struggle to raise prices. Input costs might not fall as quickly, squeezing profits to a great extent. Weak inflation is also likely to reduce the incentive for aggressive capital spending.
Markets and investors: Bond yields and stock valuations might just adjust towards more dovish expectations. A softer MAS stance on the Singapore dollar could weaken the currency.