Singapore inflation holds at 1.8% in May, cooler than expected as services costs ease

• Private transport, accommodation, retail and food costs were the largest inflation contributors, offset by declining telecommunication service prices
• MAS raised its 2026 inflation forecast to 1.5%-2.5% from 1%-2% previously, citing risks from Middle East conflicts
• Singapore's economy showed resilience with Q1 GDP expanding 6% year-over-year, exceeding the 5.1% forecast

Singapore Inflation Holds at 1.8% in May, Below Expectations

Key Figures:

Singapore's inflation rate remained unchanged at 1.8% in May, coming in below the 2% expected by Reuters-polled economists. Core inflation, excluding accommodation and private transport, registered 1.4%, also lower than the 1.6% forecast.

Main Drivers:

The largest contributors to inflation were private transport, accommodation, retail, and food costs. These increases were partially offset by declining telecommunication service prices, helping to keep overall price pressures subdued.

Monetary Policy Context:

The Monetary Authority of Singapore (MAS) tightened policy in April 2025—its first move since April 2022—citing inflation risks from Middle East conflicts. Unlike traditional central banks, MAS manages monetary policy through exchange rate adjustments, allowing the Singapore dollar to fluctuate within an undisclosed band against a basket of trading partner currencies. The central bank raised its 2025 inflation forecast to 1.5%-2.5% from a previous 1%-2% range.

Economic Backdrop:

Singapore's economy has shown resilience, with Q1 GDP expanding 6% year-over-year, surpassing the 5.1% forecast. The government maintains its 2026 GDP growth projection at 2%-4%, though it acknowledged elevated downside risks from geopolitical tensions, particularly the U.S.-Israel-Iran conflict.

Market Implications:

The cooler-than-expected inflation data suggests price pressures remain well-contained, potentially giving MAS room for policy flexibility. The resilient economic growth combined with moderate inflation indicates a stable macroeconomic environment, though geopolitical uncertainties warrant continued monitoring by investors and policymakers.