Inflation is expected to stay high in next few months, but will remain on a “broad moderating path”, says MAS

SINGAPORE: The Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) said in a joint statement on Tuesday (May 23) that a recent drop in inflation for food, gas, electricity, retail, and other goods has been offset by a higher rate of inflation for services, private transport, and accommodation.

The MAS Core Inflation came in at 5 per cent on a year-on-year basis in April, as in March. That is higher than the 4.7 per cent increase that a Reuters poll of economists had forecast.

“Taking into account all factors, MAS Core Inflation is expected to stay elevated in the next few months. Nonetheless, it will remain on a broad moderating path, before slowing more discernibly in H2 2023 as imported inflation falls further and the current tightness in the domestic labour market eases,” the joint statement said.

It also noted that with the easing of global supply chain frictions, while overall core inflation is still high, inflation has moderated in advanced economies.

The prices of energy and food commodities are now lower than at their peak in 2022.

“As a result, Singapore’s import prices have declined on year-on-year terms. On the domestic front, unit labour costs are expected to rise further in the near term. Businesses are expected to continue to pass through accumulated labour costs to consumer prices, albeit at a more moderate pace amid the slowdown in domestic economic activity,” the statement added.

Taking this year as a whole, MAS and MTI project that headline and core inflation will average between 5.5 and 6.5 per cent and 3.5 and 4.5 per cent respectively.

“Excluding the transitory effects of the 1 per cent point increase in the GST to 8 per cent, headline and core inflation are expected to come in at 4.5 to 5.5 per cent and 2.5 to 3.5 per cent, respectively.”

But the statement warned that upside risks remain, which include “fresh shocks to global commodity prices and more persistent-than-expected tightness in the domestic labour market.

“At the same time, there are also downside risks such as a sharper-than-projected downturn in the advanced economies which could induce a general easing of inflationary pressures.”

The joint statement may be read in full here.


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