Economic Analysis - MAS To Tighten Policy To Curb Rising Inflation - MAY 2018

BMI View: Singapore's expansionary budget and rising fuel prices are likely to place additional upside pressures on inflation. With growth likely to remain with the authorities' expected range, we now expect the MAS to tighten its SGD policy to ensure that inflation remains within its acceptable range as the stronger Singapore dollar will curb imported inflation.

We had previously noted that the risks to our view that the Monetary Authority of Singapore (MAS) would maintain its neutral SGD policy through April but are to the upside. With inflation likely to tick higher amid the government's expansionary budget announced in late February, we now expect the MAS to tighten its policy in 2018 in a bid to ensure that headline inflation remains within its range of 0.0-1.0%. Furthermore, growth will likely remain within the Ministry of Industry and Trade (MTI)'s expected band of 1.5-3.5%, and we forecast Singapore's real GDP to come in at 3.0% in 2018. This will enable the MAS to tighten policy without fears of derailing growth.

Inflationary Pressures Are Mounting...

Core Inflation Remains Above That Of Headline
Singapore - Inflation, % chg y-o-y
BMI, Bloomberg

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