Core inflation in Singapore dips, but Mid-East conflict raises risks

Drop driven mainly by lower food inflation; market watchers staying alert to flashpoints

- Chor Khieng Yuit

Singapore's core inflation dipped in May, reversing the increase in April, but economists said consumer prices may rise at a faster pace as tensions in the Middle East escalate after the US entered the conflict.

Core inflation edged down to 0.6 per cent year on year in May. It had climbed to 0.7 per cent in April from a four-year low of 0.5 per cent in March, snapping six straight months of year-on-year declines.

The drop-back in core inflation in May was driven mainly by lower food inflation, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in their joint report on June 23.

Core inflation excludes private transport and accommodation costs to better reflect the expenses of households here.

Both core and overall inflation readings in May were in line with forecasts by economists in a Bloomberg poll.

Overall — or headline — inflation edged lower to 0.8 per cent year on year in May, from 0.9 per cent in April. This was due mainly to smaller increases in the prices of food and private transport.

MAS and MTI left unchanged their forecasts for core and overall inflation to average 0.5 per cent to 1.5 per cent in 2025, but they said that "the uncertainties to inflation have risen amid the increased risks in the external environment".

The ministries had said in May that risks to inflation were "tilted towards the downside".

Market watchers are staying alert to potential flashpoints. Iran has threatened to shut down the Strait of Hormuz, which controls roughly 20 per cent of the world's oil flows.