Singapore inflation continued to cool in January thanks to ‘high base effects’, according to an economist. 

Meanwhile, rising global tariffs and slowing global demand will act as countercurrents for Singapore inflation going into the rest of the year first half of 2025.

High base effect

Core inflation, which excludes accommodation and private transport, fell to 0.8% year-on-year in January, the Monetary Authority of Singapore announced Monday. This was down from 1.8% in December. 

January’s decline was driven by lower inflation across the board. On a month-on-month basis, core consumer price inflation decreased by 0.2%. 

Headline inflation, which includes accommodation and private transport, eased to 1.2% year-on-year in January, compared to 1.5% in December. This reflected a moderation in accommodation inflation, along with the decline in core inflation. On a monthly basis, CPI-All Items dropped by 0.7%. 

“This was mostly down to favorable base effects,” S&P Global Market Intelligence Senior Economist Ahmad Mobeen told Diplomatic Network (Asia) late Monday. This means that prices were unusually high in January 2024, making this year’s increase seem smaller in comparison. 

“All items inflation in January 2024 was high at 2.9% year-on-year. Services inflation was 3.3% year-on-year in January 2024, which meant that this high base accompanied by a fall in education costs and health services costs led to the sector’s inflation level falling to just 1.0% on an annual basis in January 2025,” Mobeen said.  

“Similarly, food inflation was 3.3% in January 2024 year-on-year, which led to January 2025’s level at a lower 1.5% year-on-year, aided by lower pace of prepared meals price rises.” 

“Even in sectors without favorable base effects, price increases moderated,” Mobeen said. 

For example, housing costs rose more slowly, with accommodation inflation dropping to 1.6% from 2.1% last year. This happened even though last year’s lower rate was partly due to government rebates. The main reason for the slowdown is that rent prices are still going up, but not as quickly as before. 

Singapore inflation outlook 

Singapore’s imported inflation is likely to stay moderate despite the threat of tariffs worldwide. It will be supported by stable supply expectations in major food markets and projected declines in global oil prices. 

Imported inflation occurs when the prices of goods and services that a country imports increase, leading to higher costs for consumers and businesses. This can happen due to rising global commodity prices, higher transportation costs, or a weaker local currency, which makes foreign goods more expensive. 

“While an escalation of trade frictions could be inflationary for some economies, their impact on Singapore’s import prices is likely to be offset by the disinflationary drags exerted by weaker global demand,” MAS said.  

These two aspects, namely rising global tariffs and slowing global demand, will work against each other in shaping Singapore’s inflation. 

“Rising global tariffs—whether new, increased, responsive, or reciprocal—will drive up imported prices, feeding into Singapore’s supply chain and raising both consumer inflation (via higher finished goods prices) and business costs (via pricier intermediate goods),” Mobeen said.  

“However, slowing global demand, particularly from mainland China’s economic moderation, will weaken market demand, easing price pressures and partially offsetting the supply-side inflationary shock.” 

In short, Singapore will face inflationary pressure from costlier imports due to tariffs, but at the same time, weaker demand worldwide may limit how much prices actually rise. The balance between these two forces will determine the overall impact on inflation. 

MAS core inflation is projected to average between  1.0% and 2.0% in 2025, while headline inflation is seen between 1.5% and 2.5% for the year.  

“The outlook for inflation remains subject to uncertainties in the external environment,” MAS said.