Singapore inflation surprises lower, but upside risks keep MAS on tightening watch
Inflation picks up, but remains driven by energy-related costs Singapore’s CPI inflation edged up to 2.2% YoY in July from 1.9% in June but came in below market expectations of 2.4%. Core inflation accelerated more sharply, rising to 2.0% YoY from 1.6%, though it also undershot the consensus forecast of 2.2%. Despite the firmer year-on-year ...
Singapore's inflation data for July came in lower than expected, but it still kept the Monetary Authority of Singapore (MAS) on alert for possible tightening measures. The Consumer Price Index (CPI) rose to 2.2% year-on-year (YoY) from 1.9% in June, falling short of the market's forecast of 2.4%. Core inflation, which excludes volatile food and energy prices, accelerated even more, reaching 2.0% YoY from 1.6%, still below the consensus forecast of 2.2%.
However, the underlying price momentum appeared to be weakening, as headline CPI fell by 0.2% month-on-month (MoM). The increase in headline inflation was mainly due to housing and utilities, with inflation climbing to 1.3% YoY from 0.3% previously. Within this category, electricity prices surged 9% YoY, while gas prices went up by 6% YoY, reflecting the impact of higher energy costs.
The acceleration in core inflation indicates that the surge in oil prices is still affecting various goods, especially food and airfares. Accommodation prices also rose to 0.8% YoY from 0.6%.
Looking ahead, analysts believe there are still chances for inflation to rise. The ongoing uncertainty surrounding the US-Iran conflict is likely to keep global energy prices high, increasing the risk of further price hikes for domestic goods and services. Additionally, Singaporeans are facing a 17% increase in electricity tariffs between July and September, and town gas tariffs have gone up by 7.1%. The remaining impact of these tariff hikes could boost inflation in the coming months.
Other factors that could add to inflationary pressure include the growing risk of El Niño, which might raise imported food costs, and Singapore's reliance on food imports. Moreover, Singapore's robust AI-related investment and data centre activity may sustain domestic demand, potentially fueling upward pressure on services inflation.
In July, the MAS surprised investors by slightly widening the SGD NEER policy band, indicating a greater concern about inflation risks than anticipated. Despite July's inflation data falling below expectations, persistent acceleration in both headline and core inflation, along with lingering upside risks from energy, food, and domestic demand, suggests that the MAS might not be finished with tightening policies.
Therefore, the October policy meeting remains on the table, and further modest policy tightening cannot be ruled out.
Written by urgent.news from Hellenic Shipping News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
