We are lowering our average 2025 forecasts for Singapore’s headline (CPI-All Items) and core inflation to 1.3% and 1.0%, respectively (from 1.7% and 1.5%), following the soft data in January 2025.Core inflation eased significantly to 0.8% YoY, its lowest rate since June 2021, with the significant decline of 0.9 percentage points from the revised 1.7% YoY in December 2024 a magnitude not seen in years. The step-down was due to broad-based moderation across major goods and services categories (see chart), and also base effects as the impact of past goods and services tax (GST) hikes faded. Despite a 2.8% YoY rise in private transport costs in January 2025, headline inflation fell to 1.2% YoY from the revised 1.5% YoY in December 2024, reflecting lower core and accommodation inflation. 
We expect inflationary pressures to remain contained in the coming months, due to well behaved imported inflation, modest domestic business cost pass-through to consumer prices, and enhanced government subsidies mitigating essential services price increases. The January core inflation moderation supports the Monetary Authority of Singapore (MAS)’s January 2025 Monetary Policy Statement, which assessed that underlying price pressures in the economy have returned to a low and stable rate. This further underpins the MAS’s decision in January 2025 to slightly reduce the slope of the Singapore dollar nominal effective exchange rate (SGD NEER) policy band amid increased external uncertainties. Our revised core inflation forecast remains aligned with policymakers’ unchanged 2025 forecast range of 1–2%, while our headline inflation projection is slightly below their range of 1.5–2.5%. However, Singapore’s inflation faces downside global demand uncertainties, should an escalating global trade war result in sharper than expected growth slowdown. The MAS’s dovish rhetoric during its January 2025 policy review therefore leaves scope for further easing if growth and inflation disappoint.
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