SINGAPORE, July 14 — Singapore’s core inflation is projected to be between 3 and 4 per cent this year, up from the earlier forecast of 2.5 and 3.5 per cent, the Monetary Authority of Singapore (MAS) said on Thursday (July 14).
CPI-All Items inflation is also expected to come in at 5 to 6 per cent, higher than the earlier forecast range of 4.5 to 5.5 per cent, as car and accommodation cost increases are likely to remain firm, MAS added in a statement.
This is the third time this year that MAS is raising its forecasts for core inflation, which excludes accommodation and private transport costs, and overall inflation.
Inflation forecasts were previously raised in January and April.
Meanwhile, the Ministry for Trade and Industry (MTI) said that based on advance estimates, Singapore’s economy grew 4.8 per cent year-on-year in the first quarter of 2022, extending the 4 per cent growth recorded in the previous quarter.
However, on a quarter-on-quarter seasonally-adjusted basis, Singapore’s gross domestic product (GDP) was unchanged in the second quarter, after posting an expansion of 0.9 per cent in the first quarter.
In its statement, MAS noted that for the whole of 2022, GDP growth is projected to come in at the lower half of the 3 to 5 per cent forecast range.
This is amid slowing external growth momentum, which will weigh on Singapore’s trade-related sectors in the second half of the year, but domestic-oriented and travel-related
sectors are expected to continue their recovery and support economic expansion.
Inflationary pressures will also remain elevated in the months ahead.
“Although global supply chain frictions are easing, external inflationary impulses have become more broad-based, reflecting underlying constraints in global commodity and labour markets,” MAS said.
Fourth monetary policy tightening since Oct 2021
Domestically, resilient private consumption expenditure, underpinned by the tight labour market, will also lead to greater passthrough of cost pressures.
As a result, core inflation is projected to rise slightly above 4 per cent in the near term, before easing towards the end of the year, although there remain upside risks to inflation from fresh shocks to global commodity prices and domestic wage pressures.
MAS said that it “has assessed that, on balance, it would be prudent to take a further calibrated step to tighten monetary policy so as to lean against price pressures becoming more persistent”.
It will re-centre the mid-point of the S$NEER policy band up to its prevailing level, but there will be no change to the slope and width of the band.
“This policy move, building on previous tightening moves, should help slow the momentum of inflation and ensure medium-term price stability,” said MAS.
This is the fourth time since October last year that MAS has tightened monetary policy
MAS added that it will “continue to monitor global and domestic economic developments, amid heightened uncertainty on both the inflation and growth fronts”. — TODAY
