Singapore’s inflation in May 2024 met the expectations of economists, with the headline inflation rate rising to 3.1%, up from 2.7% in April. This increase was primarily driven by higher private transport costs, a key factor behind the inflationary pressure, according to data from the Department of Statistics. Core inflation, which excludes accommodation and private transport, remained unchanged at 3.1% for the second consecutive month.

The overall consumer price index (CPI) saw a 0.7% rise month-on-month, while core CPI recorded a marginal increase of 0.1%. These figures, released ahead of the Monetary Authority of Singapore’s (MAS) upcoming policy review in July, indicate that MAS is unlikely to adjust its monetary stance soon. Economists suggest that the current inflation levels do not warrant any immediate policy tightening.

HSBC economist Yun Liu emphasized that Singapore, much like the US Federal Reserve, faces ongoing concerns over persistent core inflation. As a result, he and other analysts, including OCBC’s chief economist Selena Ling, do not foresee MAS making any changes to its policy settings this year. Ling added that MAS is likely to maintain its current stance both in July and possibly in October as well, barring any unexpected global inflation surges.

In May, inflationary trends varied across different consumer price index categories. Private transport costs surged by 2.8% year-on-year, driven by increases in vehicle prices and petrol costs. Accommodation inflation, meanwhile, eased slightly to 3.4%, down from 3.5% in April, reflecting smaller increases in housing rents.

For core inflation components, electricity and gas prices rose by 6.9%, a decline from April’s 7.6%, as the rise in electricity prices moderated. Food inflation held steady at 2.8%, despite a modest increase in non-cooked food prices. Retail inflation also eased slightly, with the cost of personal effects, alcoholic beverages, and tobacco rising at a slower pace. However, services inflation edged up to 3.6%, due to higher holiday expenses and a smaller drop in airfare costs.

Looking ahead, MAS and the Ministry of Trade and Industry (MTI) have maintained their full-year inflation forecast, expecting headline and core inflation to average between 2.5% and 3.5%. Excluding the temporary effects of the goods and services tax hike, both are expected to range from 1.5% to 2.5%. Despite these projections, economists caution that rising global inflation could pose risks to the current inflation outlook.

This steady inflation trend reflects Singapore’s ongoing challenge to balance economic growth with inflationary pressures, while maintaining a stable environment for both consumers and businesses alike.