Energy price shock broadens consumer price pressures

UOB raised its 2027 average core inflation forecast to 2.2% from 2.1%.

Higher energy costs and public transport fares are expected to put further pressure on Singapore’s consumer prices as the impact of the energy price shock broadens beyond energy-related components, according to UOB.

The bank said the broadening of price pressures in July and August “suggests that the transmission of the energy price shock into consumer prices has been delayed rather than derailed.”

Brent crude oil prices have risen above US$100 per barrel over the past week amidst sustained and broadening conflict in the Middle East, alongside significant increases in other distillates including jet fuel and diesel.

UOB projects regulated electricity tariffs to increase 3.2% in 1Q27 if Brent crude oil prices remain at US$95 per barrel through mid-December 2026.

The Public Transport Council has also announced a 7% increase in bus and train fares, effective 26 December, citing higher energy costs driven by the Middle East crisis.

UOB raised its 2027 average core inflation forecast to 2.2% from 2.1%, incorporating the projected increase in electricity tariffs and the impact of higher bus and train fares. Its headline inflation forecast for 2027 stands at 2.4%.

For 2026, UOB lowered its average core inflation forecast to 1.7% from 1.8%, reflecting a sharper-than-expected decline in regulated electricity tariffs in 4Q26. It expects 4Q26 average core inflation to average 1.9%, down from its previous forecast of 2.0%.

SP Group announced a 10.4% quarter-on-quarter decline in regulated electricity tariffs, excluding GST, for 4Q26, compared with UOB’s forecast of a 3.9% decline. City Energy also announced an 8.6% fall in household gas tariffs for the quarter.

Meanwhile, upstream cost pressures have intensified. The Domestic Supply Price Index rose 38.8% year-on-year in August, up from 33.6% in July, while its non-oil component increased to 33.0% from 29.3%.

The import price index rose 15.6% year-on-year in August from 13.5% in July, while its non-oil component remained elevated at 4.8%.

UOB also reiterated its expectation that the Monetary Authority of Singapore will tighten monetary policy further at its October 2026 policy decision through another “very slight” slope-steepening move of 25 basis points, taking the S$NEER slope to 1.5% per annum.

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