For Singaporean families already feeling the pinch at the checkout counter, a slight cooling in core inflation last month offered a brief moment of respite—but analysts warn that the reprieve may be short-lived, with fresh pressures from global conflicts poised to drive costs higher in the months ahead.
Core consumer prices, which exclude private transport and accommodation costs, rose 2.2% in February, according to data released yesterday by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry. The figure came in below the median forecasts in a Bloomberg survey for a 2.6% increase and also down from the 2.4% pace recorded in January. The slower core inflation reflected lower price increases for services, food, and energy, offering some breathing room for households managing their monthly budgets.
Yet the relief may be temporary. The MAS and Trade and Industry Ministry noted in a joint statement that “while ongoing external supply constraints should ease in the second half of 2022, leading to some moderation in imported inflation, there remain upside risks to inflation from geopolitical and pandemic-related shocks.” These risks are already taking shape: Russia’s war in Ukraine and a Covid-19 resurgence in China have raised concerns about further commodity price surges and global supply chain bottlenecks.
What the cooling data means for households
The February figures are the last consumer price measures before the central bank’s next policy meeting in April, when economists expect it to further tighten settings. For residents, this could mean the cost of everyday goods—from food to energy—may climb again in the near term, even as the current data offers a temporary slowdown. “The current data doesn’t really factor in the impact of the Ukraine war, which will start to pass through to inflation in the coming months,” said Yu Liuqing, a Singapore-based country analyst for Asia at the Economist Intelligence Unit.
The slower core CPI in February reflected lower price increases across several categories that directly affect household spending: services, food, and energy. But with external supply constraints still tight and new shocks emerging, these benefits may not last. The joint statement from the MAS and the Trade and Industry Ministry highlighted that the moderation in imported inflation expected later this year depends on supply constraints easing—a scenario that remains uncertain given ongoing geopolitical tensions.
Policy tightening on the horizon
Singapore’s central bank, which uses foreign exchange as its main policy tool, is seen as likely to let the Singapore dollar appreciate against the currencies of its major trading partners. This approach can help curb imported inflation by making foreign goods cheaper in local currency terms, but it also poses challenges for exporters and could affect the cost of living for consumers who rely on imported products.
Yu Liuqing noted that the MAS is still poised to tighten further in April due to “core inflation likely consistently out-pacing the MAS’s expectations in 2022” and a more hawkish stance by the Federal Reserve. The Fed’s tightening cycle has implications for global financial conditions, including in Singapore, where the central bank must balance domestic inflation pressures with external monetary policy shifts.
What to watch next
All eyes are now on the April policy meeting, where the MAS will decide whether to adjust its exchange rate policy band. The outcome will directly affect how much Singaporeans pay for imported goods, from electronics to food staples. With the Ukraine conflict showing no signs of abating and China’s Covid-19 resurgence threatening new supply chain disruptions, the trajectory of inflation in the coming months will hinge on whether these external shocks intensify or begin to fade. For now, households should prepare for the possibility that the current cooling in core inflation may be a brief pause before a renewed climb in prices.
