Singapore’s core indices of inflation rose to 3.3% by Oct 23

Most economists expect MAS will maintain monetary policy at its next meeting, scheduled for January. However, there is disagreement over whether it will change policy in the second half of 2024.

Economists are also expecting a reversal in monetary policy tightening by 2024. It could occur as early as April. But, they noted, it may take until July or even October, “given possible lagged transmission from earlier wage increases to higher business costs”.

In their latest statement, MAS & MTI have maintained the same inflation outlook as their previous announcement. Core inflation remains projected at around 4% by 2023 with headline inflation averaging around 5%.

In 2024 the headline and core rates of inflation are projected to average between 3% and 4%, and respectively 2.5 and 3.5 percent. The projected headline and Core inflation, excluding the transitory effect of the GST hike in January to 9 %, is expected to be between 2.5 – 3.5 %, and 1.5 – 2.5 % respectively.

Inflation in the services sector was up 3.4% from 3.1 % in September. This is primarily because holiday costs have increased.

Retail inflation and other goods increased from 0.9 to 1.6 percent, mainly due to the price increases of personal care and medical products.

Inflation in the electricity and natural gas sector was up 1.8% in October after falling by 1.4 % the previous month. This is due to increased gas and electricity tariffs.

In December, core inflation will be expected to drop to between 2,5% and 3 % year-on year. In early 2024, however, the core inflation rate is likely to be affected both by seasonal factors and the GST rate increase.

The core inflation rate should moderate over the course 2024 due to the decline in import costs and the continued easing of tightness on the domestic labour markets.

Singapore’s inflation rates may see more upside in the next few months due to the geopolitical tensions that have been occurring, the impending GST hike and other administrative increases planned for the year 2024.

These include the 7 per cent increase in public transport prices from December.

The headline inflation in October was up 0.2% month-on-month, while the core inflation increased to 0.4%. Most categories recorded higher inflation in October.

Private transport inflation rose to 11.7%, up from 8.5% the month prior, due to an increase in vehicle prices.

Contrastingly, the food inflation rate eased down to 4.1% from 4.3% the previous month. Prices of prepared meals and non-cooked items increased less.

As the rate of rent increase slowed down, accommodation inflation also moderated, dropping to 4.2 percent from 4.3 in September.

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Singapore’s headline rate of inflation is expected to remain volatile for the next several months due to fluctuations of Certificate of Entitlement Prices (COE).

Private-sector economics say that headline inflation and core prices both increased in October.

The Monetary Authority of Singapore’s (MAS) and Ministry of Trade and Industry’s (MTI) data released on Thursday (Nov. 23) show that headline inflation rose to 4.7 percent, compared with the 4.1percent recorded in September.

Bloomberg poll shows that the most recent reading is also higher than a median of 4.5 per cent forecast by private-sector economics.

MTI attributed the increased headline inflation to higher private transport costs and a rise core inflation.

Core inflation (excluding accommodation and private transport) rose to 3.3%. This was slightly higher than 3 per cent, which was recorded in the preceding month.

It also exceeded the economists’ median forecast of 3.1 percent.

MTI & MAS attributed this increase to an increased inflation rate for retail and services as well a higher cost of electricity and gas.

Although inflation is expected to moderate over the next few years, the October price increase was still higher than the average before the pandemic.

The unexpected inflation data in October led some economists in the private sector to revise up their 2023 inflation predictions.

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