Singapore’s Inflation Forecast Jumps: What It Means For Your Wallet
Singaporeans are closely watching their wallets as the Monetary Authority of Singapore (MAS) recently revised its inflation forecasts upwards for 2026. This adjustment signals a significant development for households and investors alike, necessitating a re-evaluation of personal financial strategies in the face of evolving economic conditions.
The latest Monetary Policy Statement from MAS, issued on January 29, 2026, revealed that both MAS Core Inflation and CPI-All Items inflation are now projected to fall within a range of 1.0–2.0% for 2026. This marks an increase from the earlier forecast of 0.5–1.5% in October 2025. This upward revision underscores the persistent inflationary pressures that Singapore, an open economy, continues to navigate.
Understanding the Latest Inflationary Pressures
Singapore’s economic landscape in late 2025 and early 2026 has been characterised by a pick-up in inflation. MAS Core Inflation, which excludes accommodation and private road transport costs to provide a clearer picture of everyday household expenses, rose to 1.2% year-on-year in Q4 2025, up from 0.4% in the preceding quarter. For December 2025, core inflation remained steady at 1.2%, consistent with November’s figures.
Several factors are contributing to this renewed inflationary momentum:
- Domestic Cost Increases: A rise in services unit labour costs is expected to contribute to higher core inflation in the near term. This is despite a potential sustained rise in services productivity, which could help to temper the extent of cost increases.
- Global Economic Resilience: Economic activity in Singapore’s major trading partners remained resilient in the latter part of 2025, bolstered by the AI-related investment boom and reduced trade policy uncertainty. This robust global backdrop contributes to Singapore’s sustained economic growth and, consequently, domestic demand-pull inflationary pressures.
- Imported Inflation: While global oil and food commodity prices are projected to decline this year, albeit at a progressively slower pace, regional consumer price inflation is forecast to edge up modestly. This implies that imported inflation, though potentially contained, will continue to play a role in domestic prices.
For the entirety of 2025, MAS Core Inflation averaged 0.7%, a significant decrease from 2.8% in 2024. CPI-All Items inflation also saw a reduction, averaging 0.9% in 2025 compared to 2.4% in 2024. However, the latest forecasts indicate a projected increase in both core and headline inflation for 2026 from these lower 2025 rates.
The Impact on Your Daily Spending and Savings
The revised inflation forecast has direct implications for the everyday Singaporean. A higher rate of inflation means that the purchasing power of the Singapore dollar will continue to erode, making goods and services more expensive over time. For instance, the cost of private health insurance and holiday expenses were noted as contributing factors to the uptick in core inflation in late 2025. While accommodation costs are expected to reflect a pass-through of weaker housing rental growth from 2025, other areas of spending are likely to see upward pressure.
This erosion of purchasing power extends to savings. If the returns on your savings accounts or fixed deposits do not keep pace with inflation, the real value of your money diminishes. This makes it challenging for households to maintain their desired standard of living and achieve their financial goals without proactive adjustments.
Monetary Policy Response and Interest Rate Outlook
In response to the evolving inflation outlook, the MAS opted to maintain its prevailing monetary policy settings at its January 29, 2026 review. This involves keeping the rate of appreciation of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) policy band unchanged, with no alterations to its width or the level at which it is centred. This decision reflects MAS’s assessment that underlying price pressures are returning closer to trend, and that the current policy stance is appropriate to ensure medium-term price stability.
While the S$NEER has strengthened in the upper half of the appreciating policy band since October 2025, the MAS acknowledged that risks to both growth and inflation are tilted to the upside. Stronger-than-expected economic growth could lead to increased wage growth and consumer sentiment, further exacerbating demand-pull inflation. Additionally, supply shocks, potentially triggered by geopolitical developments, could elevate imported costs.
This stability in monetary policy suggests that immediate changes to borrowing costs, such as those for housing loans, may not be anticipated solely based on this MAS statement. However, the broader economic environment, including global interest rate movements, will continue to influence these rates.
Navigating Inflation: Considerations for Investment and Wealth Planning
Amidst a climate of rising inflation forecasts, prudent financial planning becomes paramount for Singaporeans. Protecting and growing wealth requires strategic considerations, particularly for those focused on their financial future. This environment highlights the importance of thoughtful investment in Singapore.
- Retirement Planning: Inflation is often termed a “silent thief” as it erodes the purchasing power of future retirement savings. For effective retirement planning, it is crucial to factor in inflation when estimating future expenses. For instance, a long-term inflation rate of 2.12% could significantly alter the amount required for retirement over two decades. Many Singaporeans expect headline inflation to rise in 2026, with expectations for core inflation also increasing. This necessitates adjusting savings goals and investment strategies to ensure that retirement funds maintain their real value.
- Wealth Accumulation Strategies: To counter the erosive effects of inflation on savings, individuals pursuing wealth accumulation should consider assets that have historically provided a hedge against rising prices. Diversification across various asset classes can be a key strategy.
- Equity Investment: Historically, a well-diversified stock portfolio can act as an effective hedge against inflation over the long run. Companies, given sufficient time, can adapt to higher costs by adjusting prices, thereby maintaining profit margins and real revenues. Certain sectors, such as financials, may perform relatively better during inflationary periods due to shorter-term cash flows. Dividend-paying stocks from companies with pricing power have also shown resilience, as they can pass on higher costs to consumers while maintaining profitability. While the Singapore market saw strong gains in 2025, sustained performance across various sectors is anticipated for 2026.
- Long Term Investment: For long term investment horizons, incorporating assets like real estate, gold, and commodities can serve as an inflation hedge. Real estate, whether through direct ownership or Real Estate Investment Trusts (REITs), often sees prices and rental incomes adjust upwards with inflation, offering both tangible value and potential appreciation. Gold is a traditional safe-haven asset, frequently sought during market uncertainties. Exchange Traded Funds (ETFs) that track broad market indices like the STI, or that offer exposure to diverse sectors and geographies (e.g., US market ETFs), can also provide a diversified approach to mitigating inflation risk. Dollar-cost averaging, a strategy of investing fixed sums regularly, can help mitigate market volatility and build wealth over time.
Global Economic Headwinds and Singapore’s Open Economy
Singapore’s highly open economy means it remains susceptible to global economic developments. While global growth is projected to ease modestly in 2026, a resilient economic activity is expected in major trading partners. The global AI-driven capital expenditure cycle is anticipated to provide strong support for economies integrated into the electronics supply chain, including Singapore. Singapore’s GDP growth in Q4 2025 was stronger than projected, largely due to robust performance in manufacturing and services linked to the global technology cycle.
However, uncertainties persist. Downside risks include a sharp correction in global financial markets or an abrupt pullback in global AI-related investment, which could lead to a faster easing of growth and lower inflation. Geopolitical developments also pose a risk of lifting imported costs. The International Monetary Fund (IMF) projects global growth at 3.3% for 2026, with differing outlooks across major economies like the US, China, and the Eurozone, all of which indirectly influence Singapore’s economic trajectory and inflation.
Conclusion
The upward revision of Singapore’s inflation forecast for 2026 by MAS signals a dynamic economic environment that requires vigilance and adaptability from Singaporeans. While MAS maintains its current monetary policy to ensure price stability, individuals should proactively review and adjust their financial plans. Understanding how inflation impacts daily expenses, savings, and investments is crucial. By considering diversified investment strategies that account for inflationary pressures, individuals can better safeguard their financial well-being and progress towards their long-term financial goals in Singapore’s evolving economic landscape.
