SINGAPORE- Singapore’s key consumer price gauge in July rose again at its fastest pace in more than 13 years, official data showed on Tuesday, mounting pressure on the central bank to consider another policy tightening move later this year.
The pick-up in inflation was mainly driven by stronger increases in the prices of food, electricity and gas, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry said in a statement.
The core inflation rate – the central bank’s favored price measure – rose to 4.8 percent in July on a year-on-year basis. A Reuters poll of economists had forecast a 4.7 percent increase.
Headline inflation rose to 7 percent, matching economists’ forecast.
The core and headline inflation rates were 4.4 percent and 6.7 percent respectively in June.
Following July’s inflation data, three economists said they expect MAS to tighten monetary policy in their scheduled statement in October, but added the likelihood of another off-cycle tightening before then is low.
Singapore’s central bank has tightened its monetary policy three times this year, twice in surprise moves in January and July. It typically publishes two scheduled monetary policy statements a year, in April and October.
“My baseline case is still for another tightening at the scheduled October statement as inflation has not yet peaked and shown signs of stabilization,” said Selena Ling, head of treasury research and strategy at OCBC.
The MAS’ core inflation forecast for this year is between 3 percent and 4 percent, while headline inflation is expected to come in between 5 percent and 6 percent.
Singapore’s economy expanded less than initially estimated in the second quarter and the government revised its growth projections for 2022 lower, flagging risks to the global outlook from the Ukraine war and inflation.
Gross domestic product (GDP) grew 4.4 percent year-on-year in the second quarter, the Ministry of Trade and Industry (MTI) said, slower than the 4.8 percent growth seen in the government’s advance estimate.
The weaker growth was partly due to the slowdown in electronics manufacturing, according to MTI. The ministry said weakness in China’s economic outlook, a key market for petroleum and chemicals products, had also adversely affected Singapore’s growth prospects.
The Southeast Asian financial hub is often seen as a bellwether for global growth as international trade dwarfs its domestic economy.
On a quarter-on-quarter seasonally adjusted basis, the economy contracted 0.2 percent, compared with the government’s advance 0 percent estimate and the 0.8 percent growth in the first quarter.
Singapore defines two consecutive quarters of quarter-on-quarter economic contraction as technical recession.
The MTI said it would narrow its 2022 GDP growth forecast range to 3 percent to 4 percent from 3 percent to 5 percent, adding the external demand outlook for the economy has weakened compared with three months ago.
Singapore’s inflation has reached a more than one decade-high in recent months and its central bank tightened monetary policy in July in an off-cycle move to bring down cost pressures. — Reuters
