Singapore's core inflation cooled to 2 percent in September, but electricity bills are still rising 8.7 percent: what it means for MAS

What is Singapore's inflation rate now? Core inflation, the measure the central bank watches most closely, eased to 2 percent in September from 2.2 percent in August, a two year high, according to official data reported by AsiaOne. Headline inflation slipped to 2.2 percent. The cooling came from lower inflation in services and retail goods, even as electricity and gas prices stayed 8.7 percent higher than a year earlier.

The reading surprised economists who had expected a slight pick up, and it has split opinion on what the Monetary Authority of Singapore will do next. For households, the picture is mixed: overall price growth is moderating, but utility bills and car costs are still rising quickly. For investors, the data feed into expectations for the Singapore dollar and interest rates at a time of high oil prices and uncertain global growth.

What drove the September slowdown

Services inflation moderated from 2 percent in August to 1.7 percent in September, because of a smaller increase in point to point transport costs, such as taxis and ride hailing, and a larger fall in telecommunications prices. Retail and other goods inflation eased from 1.8 percent to 1.2 percent as furniture prices declined and clothing prices rose more slowly.

On a month on month basis, core prices rose by 0.1 percent in September. Overall prices rose 0.2 percent from August, easing from a 0.6 percent monthly rise the previous month. Core inflation excludes accommodation and private transport because those categories are volatile and heavily influenced by government policies, such as housing supply and vehicle quotas.

Food and accommodation moved slightly higher. Food inflation rose 0.1 point to 2.4 percent on higher prices for non cooked food and food services, while accommodation inflation rose to 0.9 percent as housing rents increased faster. Those are categories that households notice every week.

The fall in telecommunications prices may reflect competition among mobile operators, which has pushed down the cost of some plans. Smaller increases in point to point transport fares, which include taxis and private hire cars, also helped. These are categories where competition, rather than global costs, sets prices, which is why they can move independently of energy markets.

Why power bills are still climbing

Electricity and gas inflation stayed at 8.7 percent in September, the same pace as in the previous two months, largely because of an increase in the regulated electricity tariff in July 2026. Singapore imports almost all its energy, mainly natural gas, so global energy prices pass through to household bills with a lag.

The authorities warned that energy commodity prices have risen again and are projected to remain high in the near term. That could push up global and regional food prices as costlier inputs and bad weather affect production. Private transport inflation eased to 7.1 percent from 7.5 percent as car prices rose more gradually, but it remains high.

Singapore's inflation headline says the worst is over. The electricity bill says otherwise. Households feel the second number, not the first.

The authorities expect imported inflation to ease in 2027 as temporary supply disruptions fade, and domestic pressures to stay subdued, with unit labour costs in services contained by productivity gains. Enhanced government subsidies, such as for healthcare and education, will also dampen services inflation, they said.

What economists expect from MAS

Economists were divided on whether Singapore's central bank will move in the near term, according to The Business Times. Some lowered their inflation forecasts after the softer reading. MAS kept policy unchanged at its October meeting, surprising private sector economists who had expected a tightening move.

Unlike most central banks, MAS manages monetary policy through the exchange rate rather than an interest rate. It adjusts the slope, width and centre of a policy band for the Singapore dollar's trade weighted value. Tightening means allowing the currency to strengthen faster, which makes imports cheaper and helps contain inflation.

The authorities project core inflation to average 1.5 to 2 percent in 2026 and 1.5 to 2.5 percent in 2027, remaining slightly elevated in the coming quarters before easing from mid 2027. They said risks remain tilted to the upside, as a sharp and sustained surge in energy or food prices could lift import costs more than expected.

The risks in both directions

On the upside, domestic inflation could stay elevated if spillovers from the AI related investment boom broaden and labour costs rise faster. Singapore has attracted large flows of capital and wealth, as we covered in our report on Citi's Singapore wealth findings, which can add to demand for property, services and labour.

On the downside, higher than expected global interest rates or a pullback in AI related investment could slow growth and inflation. Energy prices could also fall faster if Middle East production and shipments recover sooner than expected. The key factors to watch for Singapore's inflation path include:

• Global oil and gas prices and their pass through to tariffs
• Food prices affected by input costs and weather
• Car prices and the vehicle quota system
• Labour costs linked to the AI investment boom
• The Singapore dollar's strength under MAS policy

Global conditions add to the uncertainty. Oil prices have been volatile because of conflict in the Middle East, and Singapore, as a small open economy that imports most of what it consumes, is especially exposed to swings in global commodity prices. Even a temporary spike in energy costs can feed through to transport, food and utility bills within months.

Wage growth is another factor the authorities are watching. If the AI investment boom pushes up demand for skilled workers faster than supply, higher salaries could spread into service prices, keeping inflation above the authorities' comfort zone for longer.

What it means for households and investors

For households, the slowdown in core inflation is modest relief, but bills for electricity, gas and transport remain high. Government subsidies for healthcare and education help, though they do not offset every rising cost. Retirees and lower income families, who spend a larger share of income on essentials, feel utility increases most.

For investors, the split view on MAS keeps uncertainty around the Singapore dollar. A softer inflation path reduces pressure for tightening, while upside risks from energy keep the door open. Singapore's retirement system ranks among the world's best, as covered in our report on the 2026 Global Pension Index, but even strong savers need returns above inflation to preserve purchasing power.

Singapore's inflation is cooling at the core, but energy costs keep household bills elevated and the risks remain skewed upward. With MAS having held in October and economists divided, the path of oil prices may decide the central bank's next step. For households and investors alike, the battle with the cost of living is not over yet.