Oil not el nino is driving singapore inflation

Key arguments

• Inflation is being driven by energy costs and their pass-through, not by an El Niño-related food price shock.
• Firming core inflation suggests elevated oil prices are feeding into a wider range of components, particularly transport-related services.
• Upside risks remain: US-Iran conflict uncertainty keeping energy prices elevated, growing risk of severe El Niño raising imported food costs, and robust AI-related investment and data centre activity sustaining domestic demand.
• After July's surprise increase in the SGD NEER policy band slope, further acceleration in headline and core inflation means the MAS may not be done tightening, and the October meeting remains live.

Corresponding source evidence

1. With upside risks from energy prices, imported inflation, and resilient domestic demand, the October MAS meeting remains live Singapore's city centre Energy remains the main inflation story Singapore's CPI inflation edged up to 2.3% YoY in August from 2.2% in July, while core inflation rose to 2.2% YoY from 2.0%, both broadly in line with expectations.
2. Upside inflation risks keep October MAS meeting live Looking ahead, we believe risks to the inflation outlook remain skewed to the upside and expect core inflation to accelerate further in the coming months.
3. Third, Singapore continues to benefit from robust AI-related investment and data centre activity, which could sustain domestic demand and contribute to upward pressure on services inflation.