Singapore’s core inflation remained unchanged last month, as lower energy and goods prices offset an increase in the cost of services.

Core prices, which exclude private transport and accommodation costs and are closely watched by the central bank, came in at 3.1% in May from a year ago - holding steady at the level seen in the previous two months, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry said in a statement on Monday. The reading matched the median estimate in a Bloomberg survey of economists.

The all-items inflation quickened 3.1%, after gaining 2.7% in the month prior. The acceleration was driven by higher private transportation costs, according to the statement. On a month-on-month basis, the headline measure increased by 0.7%.

While relatively stable global energy and food prices in recent months have helped, a gradual strengthening of the Singapore dollar’s trade-weighted exchange rate is expected to temper imported inflation going ahead. The local currency, which had weakened 2.29% against the US dollar in the first five months of this year, clawed back some of the losses in May.

The MAS, which has maintained its tight monetary policy settings for the past four meetings, is unlikely to change that approach, given lingering risks from fresh geopolitical shocks, adverse weather events, and possible energy and food price shocks due to any further transport disruptions. 

The authorities retained their forecasts for both core and all-items inflation to average 2.5%-3.5% this year. Economists from the latest MAS quarterly survey in June lowered their forecast for headline inflation this year to 2.8%, from 3.1%, while keeping the outlook on the core gauge at 3%.

  - Bloomberg