Daily Management Review

Singapore June Core Inflation Reaches A 13-Year High, Putting Tightening Worries In The Spotlight


Singapore June Core Inflation Reaches A 13-Year High, Putting Tightening Worries In The Spotlight
Singapore's core consumer price index climbed at its fastest rate in more than 13 years, according to official statistics released on Monday, putting greater pressure on the central bank to consider tightening monetary policy again later this year if inflationary pressures persist.
Inflation was rising across a wide range of areas, including services, food, retail, and utilities, according to the report.
The core inflation rate, the central bank's preferred pricing metric, increased to 4.4 per cent year on year in June. A Reuters survey of economists predicted a 4.2 per cent rise in June.
Inflation surged to 6.7 per cent, surpassing economists' projection of 6.2 per cent.
"Our base case remains for the Monetary Authority of Singapore to tighten its FX policy settings again in October," said Brian Tan, senior regional economist at Barclays, which also raised its full-year inflation forecast following the data.
Because trade flows dwarf its economy, the MAS conducts monetary policy through exchange rate settings rather than interest rates.
Tan expects a 50 basis point slope increase in October to an estimated 2.0 percent, and he warns that "core inflation is likely to surprise the central bank to the upside again."
Singapore's central bank unexpectedly tightened monetary policy on July 14, the fourth tightening in the previous nine months. The central bank usually issues two monetary policy announcements every year, in April and October. more info
Maybank, on the other hand, believes that MAS will hold policy in October after tightening in July.
“So unless inflation continues to surprise on the upside, like if inflation data in the fourth quarter continues be close to 5%, they may have to tighten another round,” said Lee Ju Ye, an economist at Maybank.