The Monetary Authority of Singapore (MAS) expects the inflation rate to remain high, on the back of the slowdown in the global economy.
According to the central bank’s quarterly report, inflation will remain above five percent for now.
“Inflation is expected to remain elevated at slightly over five percent in the next few months, on account of continued strong increases in accommodation costs, before slowly trending down towards the end of the year,” said MAS in its “Recent Economic Developments in Singapore” report.
The increasing cost of acquiring cars will also add to the upward pressure on the consumer price index (CPI), a gauge of inflation based on the cost of goods and services, said MAS.
The strong Singapore dollar, which appreciated 20 percent against the US dollar in the last two years, has had a cooling effect on the prices of key imports, such as energy and food. However, local exporters have complained of falling competitiveness as the strong currency has increased the cost of their products in international markets.
“This high inflation and still-tight labour market suggest that the MAS probably won’t ease policy soon and will be biased toward a tightening,” said Wu Kun Lung, an economist at Credit Suisse.
Thio Chin Loo, Senior Forex and Interest Rate Strategist (Asia) at BNP Paribas, said, “If the world economy becomes less stable then the pace of Sing dollar appreciation could be judged to be a little bit too aggressive.”
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