Singaporean headline inflation rises in May

Singaporean headline inflation rises in May, coming in line with market projections. Increased accommodation costs and fuel prices pushed up the overall CPI. Inflation rose for the first time in three months, taking the gains in headline prices to 0.4 percent year-on-year in the month. On a sequential basis, the overall price changes came in at 0.6 percent, owing to the rise in accommodation costs as S&CC rebates were disbursed in April but not in May. Increased petrol prices also provided support to private road transport costs.

But retail rents have continued to be weak and is expected to cap further gains in headline prices, noted ANZ in a research report. The MAS has maintained its 0 percent to 1 percent forecast range for the headline inflation, citing the price support from global commodity rally since the start of the year.

In the meantime, the MAS’s core prices continued to be the same over the month though it rose to 1.5 percent year-on-year from 1.3 percent year-on-year in April on base effects. Year-to-date, core inflation averaged 1.5 percent. The MAS continues to expect core inflation to rise slowly into the upper half of the one percent to two percent forecast range, on the back of a more rapid rate of wage growth through the year, according to the CPI release statement.

Growth in wages and domestic demand would need to gather rate considerably to generate sufficient demand-driven price pressures to underpin further tightening by the MAS at its next policy meeting in October, stated ANZ in a research report.

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