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Singapore’s inflation is expected to ease through 2023

Singapore’s headline and core inflation are experiencing a slowdown, reaching their lowest levels since mid-2022, according to BMI, a Fitch Solutions company.

The headline inflation eased from 5.1% y-o-y in May to 4.5% in June, driven by lower private transport and food prices. Core inflation, excluding transport and accommodation costs, fell from 4.7% to 4.2% in June.

Due to lower inflation, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) adjusted their forecasts. BMI expects inflation to ease further to 3.9% by the end of 2023, with the second half of the year showing a slower decline.



SINGAPORE: The city-state’s headline and core inflation is slowing again, reaching their lowest points since mid-2022, according to BMI, a Fitch Solutions company.

The headline consumer price index eased from 5.1% year-on-year (y-o-y) in May to 4.5% in June, which was slightly below consensus estimates of 4.55%.

The easing of price growth was driven by a decline in private transport inflation as well as a fall in food and services prices.

In addition, core inflation, which excludes private transport and accommodation costs, fell from 4.7% y-o-y in May to 4.2% in June, in line with expectations.

As a result of the lower inflation print, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) lowered their headline inflation forecast from between 5.5% – 6.5% to between 4.5% -5.5% but maintained their core inflation forecast at 3.5% to 4.5%.

“We have lowered our forecast for headline inflation to ease to 3.9% y-o-y by end-2023 (from 4.2% previously) as inflation fell faster than we expected for the first half of the year.“

“We maintain our forecast for inflation to average at 4.8% for 2023 as we expect the fall in inflation to slow in the second half of 2023.”

“Our estimates are broadly aligned with Bloomberg consensus for inflation to fall to 3.7% by year-end and average 4.7% for 2023,” said the research house on Thursday (27 July).

The research arm expects price increases to continue tapering off on the back of declining imported goods prices as inflation in the city-state’s major trading partners ease (see charts).

“A moderation in global supply chain frictions, energy, and food commodity prices also serve as tailwinds to the overall trend of disinflation.”

“Moreover, we believe that the MAS’ current policy stance is adequate to reduce imported inflation and curb domestic cost pressures.”

“Indeed, MAS maintained its policy settings in April 2023 after tightening policy in five successive meetings since October 2021 to tone down the momentum of price increases,” it said.

Given that Singaporean interest rates tend to track the United States rates, the research house expected the 25bps rate hike to 5.50% by the US Federal Reserve (US Fed) on Wednesday (26 July) will tighten policy in Singapore.

“Looking ahead, we believe that this will mark the end of the Fed’s tightening cycle. The MAS’ next policy announcement is scheduled for October 2023 although for the moment, we do not expect any change to be announced,” it said.

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