SINGAPORE- Singapore’s key consumer price gauge rose at its fastest pace in more than 13 years, official data showed on Monday, increasing pressure on the central bank to consider tightening monetary policy again later this year if inflation pressures persist.
The data showed inflation rising across a broad set of categories including services, food, retail and utilities.
The core inflation rate – the central bank’s favored price measure – rose to 4.4 percent in June on a year-on-year basis. A Reuters poll of economists had forecast a 4.2 percent increase in June.
Headline inflation rose to 6.7 percent, compared with economists’ forecast of 6.2 percent.
“Our base case remains for the Monetary Authority of Singapore to tighten its FX policy settings again in October,” said Brian Tan, senior regional economist at Barclays, which also raised its full-year inflation forecast following the data.
The MAS manages monetary policy through exchange rate settings, rather than interest rates, as trade flows dwarf its economy.
Tan sees a 50 basis point slope increase in October to an estimated 2.0 percent and noted the high risk of another upward re-centering as “core inflation is likely to surprise the central bank to the upside again.”
Singapore’s central bank tightened its monetary policy in a surprise move on July 14, the fourth tightening in the past nine months. The central bank typically publish two scheduled monetary policy statements a year, in April and October.
Maybank, however, expects as its base case MAS will hold policy in October after front-loading the tightening in July.
“So unless inflation continues to surprise on the upside, like if inflation data in the fourth quarter continues be close to 5 percent, they may have to tighten another round,” said Lee JuYe, an economist at Maybank.
Last week, Ravi Menon, the managing director of the Monetary Authority of Singapore (MAS) said Singapore’s economic growth is expected to moderate further next year, tracking a slowdown in its major trading partners, while global inflation is expected to ease in 2023.
“We are seeing a surge in inflation globally because a robust demand recovery post-COVID has run into supply-side frictions and, more recently, war-related disruptions,” said Menon
“Rising inflation has no doubt dented business and consumer confidence, but not yet to a degree that would lead to a severe downturn this year,” Menon told a news conference after the MAS published its annual report.
Singapore tightened its monetary policy in an off-cycle move that came just after Canada’s surprise 100 basis point interest rate hike and before an out-of-cycle rate hike in the Philippines.
“Taming inflation is like trying to slow down a speeding car on a gentle slope. It takes a combination of forcefulness and calibration,” Menon said.
“Inflation is expected to ease in 2023 as major central banks withdraw policy accommodation and supply challenges are addressed,” the MAS said in its annual report.
