Singaporean headline inflation remains unchanged October, core rate to remain above 2 pct by end-2018

Singaporean consumer price inflation remained unchanged in October. On a year-on-year basis, the CPI-All Items inflation stayed the same at 0.7 percent, coming in below market expectations. Sequentially, the consumer price inflation index dropped 0.3 percent, mainly due to a 2.2 percent sequential fall in accommodation costs. The S&CC rebate in October was the main reason for the fall in accommodation costs, which should unwind in November. Food prices remained the same. Prices for petrol were up 1.8 percent, though this was countered by the fall in COE prices that lowered the cost of private road vehicles. The MAS core inflation rose to 1.9 percent year-on-year.

“We expect the MAS Core Inflation to be at or slightly above 2 percent y/y by the end of the year. This is due to higher gas tariffs which came into effect on 1 November, the 4.3 percent rise in bus and rail fares from 29 December, and continued increase in other core CPI prices”, stated ANZ in a research report.

The rebounding labor market might continue to see domestic inflation pressures keeping core inflation up at about the 2 percent level over the early part of next year. The recent fall in global oil prices might provide some offset to that.

The MAS continues to project CPI-All Items inflation at 1-2 percent and MAS Core Inflation at 1.5-2.5 percent in 2019.

“If this eventuates and Singapore’s GDP growth continues to be above trend, a further tightening in April 2019 is likely, in our view”, added ANZ.