Monetary Authority of Singapore likely to adopt further policy normalisation at April 2019 review, says ANZ Research

The Monetary Authority of Singapore (MAS) is expected to adopt further policy normalisation at their April 2019 review, according to the latest report from ANZ Research. Singapore’s CPI for September came in slightly below market expectations on both the headline and core measures.

The main source of the lower-than-expected inflation outturn was the prices for retail-related items, notably clothing and footwear. The slight moderation in the MAS Core Inflation to 1.8 percent y/y in September from 1.9 percent y/y in the previous month will be temporary, as domestic demand-related price pressures push it higher.

CPI-All Items inflation for September was unchanged at 0.7 percent y/y, which was slightly below the 0.8 percent that the market had forecast. On a sequential basis, the CPI index was unchanged. Higher food, petrol and education prices were offset by falls in car prices, accommodation costs, and retail-related prices.

Further, the moderation in the MAS Core Inflation in September is expected to be temporary. Higher utility prices in October, some unwinding of the retail-related price declines in recent months, as well as higher food prices will see core inflation rise towards or slightly above 2 percent y/y by the end of the year, the report added.

"We do not see the MAS tightening at their October review to mark the end of the policy normalisation cycle. We expect further tightening to ensure that core inflation remains contained. Our base case is for another slight increase in the slope of the policy band at their April 2019 review," ANZ Research also commented.