Singapore inflation registers 21st consecutive month of decline, likely to maintain downtrend

Consumer prices in Singapore registered a decline for the 21st consecutive month in July, as housing and utilities remained a drag on consumer spending. However, core inflation has maintained positivity and is likely to remain on an upward trend. Further, non-core inflation is expected to maintain its declining trend.

Singapore’s latest July CPI inflation registered -0.7 percent y/y, while core-inflation remained in positive ground at 1.0 percent. Housing and utilities have remained a key drag but transport inflation has become less negative on account of the higher COE premiums.

Further, the easing in car loan regulations announced by the Monetary Authority of Singapore (MAS) earlier on has brought about an increase in car purchases and henceforth, upward adjustments in the COE premiums. That, in turn, has lifted the private transport CPI index given the strong influence of COE premiums on the index.

Overall, inflation is expected to average -0.5 percent and 0.9 percent in 2016 and 2017 respectively. It will remain stuck in negative territory until the end of the year or the earlier part of next year. But core inflation is expected to continue to remain in positive level and possibly creep higher, DBS reported.

Meanwhile, the central bank is more likely to keep its monetary policy status quo for now before further assessment on the balance of risk between growth and inflation in the lead up to the next April meeting.