Key Points
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Singapore’s benign inflation could remain entrenched, giving MAS room to ease policy further, possibly as early as at the October meeting, when we anticipate the tariff impact on growth to emerge. We forecast core inflation at 0.6% in 2025 and 1% in 2026.
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Government subsidies and rebates will help contain cost pressures, but administered prices account for only ~18% of the CPI basket. Global price dynamics remain a key driver of inflation.
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Easing global commodity prices and a firm Singapore dollar will keep imported inflation in check. A 1% appreciation in Singapore’s nominal effective exchange rate is estimated to reduce core CPI by a cumulative 0.9ppt within 7-8 months.
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Domestic cost pressures will also remain modest, given moderating labour market tightness and falling non-oil import prices. The looming tariff impact will also start to weigh on growth and inflation in Q4 and early 2026.
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We forecast USDSGD to fall to 1.2700 by end-2025 and 1.2600 by Q2 2026, mainly due to our expectation for further USD weakness. We also expect the Singapore overnight rate (SORA) to remain soft, amid subdued inflation, a firm SGD, and flush liquidity conditions. We forecast the 3-month compounded SORA to ease to 1.37% by end-2025 and 1.26% in 2026, from 1.60% currently.
