Impact of Easing of Monetary Policy on Import Prices of Essential Goods

Mr Yip Hon Weng asked the Prime Minister and Minister for Finance in view of the recent easing of monetary policy stance to favour a more gradual appreciation of the Singapore dollar (a) how does the MAS assess the impact of this policy move on import prices, particularly essential consumer goods like food; and (b) what measures are in place to mitigate any adverse effects on consumers.

Mr Gan Kim Yong (for the Prime Minister): Inflation has fallen since the peaks reached in 2022-2023 during the global inflation shock. The Monetary Authority of Singapore (MAS) Core Inflation fell below 2% year on year in November 2024 and has averaged 1.2% year on year in the months since. The pace of price increases has moderated across a wide range of goods and services, including food, retail goods; discretionary services, like restaurant meals; and essential services, like public healthcare. For instance, non-cooked food inflation averaged 1.2% year on year in the second half of 2024, compared to 3.6% over the same period a year earlier.

MAS Core Inflation is forecast to ease further to 1%-2% in 2025, from 2.8% last year. Singapore's imported cost pressures are expected to be contained, given forecasts for favourable supply conditions in key food commodity markets and gradually declining global oil prices. The policy band for the Singapore Dollar Nominal Effective Exchange Rate remains on a modest and gradual appreciation path even after the easing of the policy stance. MAS has assessed that this will ensure medium-term price stability. MAS continues to be vigilant and will carefully assess the impact of global and domestic developments in its quarterly monetary policy reviews.

Although inflation, which is the rate of price increases, has come down, prices of many items have not. The Government recognises that households continue to face cost-of-living pressures and is addressing these concerns on multiple fronts. The measures include diversifying supply sources, including for food, to prevent sharp domestic price increases in the event of country or region-specific disruptions. The Government has also increased cost-of-living support to Singaporeans, including in Budget 2025.