Singaporean headline inflation rises above expectations in May, core inflation likely to ease in coming months

Singaporean headline inflation rises above expectations on a year-on-year basis in May. CPI-All Items inflation accelerated to 0.9 percent in the month, but it does not signal at a rise in inflationary pressure. On a sequential basis, the inflation came in at 0.7 percent, as compared with market expectations of 0.5 percent.  The MAS core inflation remained the same at 1.3 percent on a year-on-year basis.

However, there are signs that inflation pressures are easing. The ratio of job vacancies to unemployed persons, typically a leading indicator for core inflation, has begun to fall. This implies that inflationary pressures from the labor market are easing, noted ANZ in a research report.

Moreover, despite the recent rise in Brent oil prices on the back of Iran tensions, global oil prices are lower compared to year ago levels, and is set to weigh on the MAS core inflation in the months ahead. With the Great Singapore Sale set to bring down retail prices in June, the MAS core inflation is expected to come in at 1 percent year-on-year in the next few months.

“This in itself will not be cause for the MAS to change their current monetary policy stance. However, should downside risks to Singapore’s export and growth outlook worsen, then the odds of an easing move at the October MPS would increase. The extent of the downside growth risks would hinge on the outcome of the meeting between President Trump and President Xi at this week’s G20 Osaka summit”, added ANZ.