Singapore’s core inflation has cooled, but no one in official circles is celebrating. The 2.2 percent reading for February, released by the Monetary Authority of Singapore on March 24, looks like a reprieve. It fell short of January’s 2.4 percent and missed the 2.6 percent median forecast from a Bloomberg survey. The dip came from smaller increases in services, food, and energy costs. Yet the same government report warned that “upside risks to inflation from geopolitical and pandemic-related shocks” are building. That warning has shifted market expectations toward another tightening move when the MAS next meets in April.
This is not a story about a problem solved. It is a story about a problem delayed.
The February number strips out private transport and accommodation — the two most volatile categories in Singapore’s small, open economy. Without them, the core gauge gives a cleaner read on underlying demand. Even so, it has now run above 2 percent for eight straight months. The slowdown in services came from a smaller rise in holiday costs. Food and electricity tariffs rose more gradually than in January. Taken alone, the figures offered consumers a rare break after a year of steady increases.
But the break is technical, not fundamental. The data simply did not capture the commodity spike that followed Russia’s invasion of Ukraine. Front-month Brent crude has surged about 25 percent since late February. Global wheat prices are at 14-year highs. Those increases hit utility tariffs and bread prices with a lag. Households will feel the shock starting with March bills.
EIU Singapore analyst Yu Liuqing put it plainly: “The print simply didn’t capture the commodity spike that followed Russia’s invasion.” Core inflation is expected to re-accelerate to 3 percent or more by mid-year. That would push it well above the MAS’s long-run comfort band of 1 to 2 percent.
The war is not the only threat. Pandemic-related shocks continue to disrupt supply chains. China’s renewed lockdowns, including a sweeping shutdown in Shanghai, add pressure on shipping and manufacturing. Singapore imports nearly all its food and energy. It has no buffer of domestic production to absorb global price swings. When wheat prices rise in Chicago, bread prices rise in Singapore within weeks.
The MAS has already tightened policy twice in the past six months. It moved in October and again in January, surprising markets both times. The central bank uses the exchange rate as its main tool, letting the Singapore dollar appreciate to dampen imported inflation. That strategy works only as long as the global price shock does not accelerate faster than the currency can strengthen.
February’s cooling gave the central bank no reason to pause. If anything, the lag in the data means the MAS will see the full effect of the commodity spike only after it has already hit consumers. Waiting would mean reacting to a problem that has already arrived. The market now bets the bank will move again in April.
The broader picture is one of persistent pressure. Core inflation has not dipped below 2 percent since mid-2021. The war in Ukraine has injected a new layer of uncertainty into energy and food markets. China’s zero-Covid policy keeps supply chains brittle. Singapore, as a trade-dependent city-state, absorbs every shock that moves through global markets. There is no insulation.
For now, the February number gives households a single month of relief. Utility bills will rise in March. Food prices will follow. The central bank will likely tighten again. The war grinds on. The lockdowns continue. The inflation problem is not going away. It is just showing up late.
