Headline inflation expectation rises to 4.6% in September: DBS, SMU

This is the highest recorded expectation since December 2011.

The DBS Group Research and the Singapore Management University (SMU) have raised their One-year-Ahead headline inflation expectation to 4.6% in September 2022 from 3.9% in June 2022. 

In its Singapore Index of Inflation Expectations, the DBS and SMU noted this is the highest recorded One-year-Ahead inflation expectations since December 2011. This is also higher than the historical third quarter average of 3.18%. 

“With the various measures ranging from 4 to 6%, ongoing developments with respect to inflation expectations are somewhat concerning. Through the course of this year, inflation expectations have risen considerably, in response to global price developments,” DBS Chief Economist and Managing Director of Group Research, Taimur Baig, said.

“Growth has already slowed in Singapore, but at the same time, Monetary Authority of Singapore (MAS) is compelled to continue tightening monetary policy. Such tightening may be uncomfortable for many, but the regressive impact of high inflation is far more pernicious.”

Read more: Economists raise full-year headline inflation forecast to 5.5% to 5.9%: survey

September 2022 forecast showed that the MAS median Consumer Price Index-All Items inflation for 2023 will stand at 3.5%, whilst MAS Core Inflation will be 3.1%. 

CPI data released by the Department of Statistics showed that CPI-All Items increased by 5.7% from January to August 2022, compared to the same period last year. 

Just last 14 October, MAS further tightened its monetary policy by re-centering the mid-point of the S$ nominal effective exchange rate (S$NEER) policy band up to its prevailing level. 

“The latest inflation data, including importantly the September CPI report in the US, continues to surprise on the upside, which is consistent with what inflation expectations surveys are showing,” Sim Kee Boon Institute for Financial economics Director, Professor Dave Fernandez said.

“The September monthly surveys from the NY Fed saw 3-year and 5-year inflation expectations edge up, but 1-year expectations dropped, while in the University of Michigan survey, 5-year inflation expectations also fell. These contrast with our Singapore survey results, so it will be important to track if this US-Singapore divergence continues or if our surveys converge in the coming months.”