Economic Analysis - Inflation To Remain Manageable Despite Recent Spike - SEPT 2017


BMI View: Inflation in Singapore has remained on a gradual uptrend and we believe that inflation is unlikely to surge significantly, and maintain our forecast for headline CPI to average 1.0% in 2017 . Despite Singapore's real GDP growing by 2.5% y-o-y in Q217, growth remains uneven. As such, we maintain our forecast for the MAS to maintain its existing stance during its meeting in October, but note that the risks to our view are to the upside amid rising inflationary pressures.

Consumer prices in Singapore jumped to 1.4% y-o-y in May as compared to the 0.4% y-o-y rate recorded in the previous month. Meanwhile, core inflation has remained somewhat steady, rising by 1.6% y-o-y in the same month (compared to 1.5% y-o-y in April). The surge in inflation was mainly due to a change in the timing of the disbursement of service and conservancy charges (S&CC) rebates. However, we do not expect inflation to spike as a weak property market and a strong Singapore dollar will likely keep inflation capped. We therefore maintain our average 2017 inflation forecast at 1.0% (compared with the -0.2% recorded in 2016), which is within the Monetary Authority of Singapore (MAS's) range of 0.5-1.5%. With growth remaining uneven and inflation unlikely to spike, we forecast the MAS to maintain its existing stance during its meeting in October to support growth, but note that the risks to our view are to the upside.

Inflationary Pressures Remain Contained

Inflation Spike Unlikely To Last
Singapore - CPI, % chg y-o-y
BMI, Bloomberg

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