Analyst sees lower commodity prices to persist, dampen cost pressures risks

There are lower commodity prices seen in Brent crude.

The sequential growth in headline consumer price index had subdued in September 2022 to 0.5% month-on-month (MoM) from 0.70% in August, according to RHB.

The analyst’s brokerage report showed that the softened CPI was on the back of decelerating price increase such as in food.

“Much of the slowdown is likely led by lower commodity prices seen in Brent crude (Sept: US$88.9/bbl, Aug: US$96.6/bbl) and FAO food index (Sept: 136.4, Aug: 137.9),” read the report.

“We are of the view that further dissipation of commodity prices will persist and dampen inflation risks into year-end,” it added.

Whilst it mentioned that the headline and core inflation momentum will ease for the rest of the year, the year-on-year rates would still be high amidst continued geopolitical conflict.

Monetary policy expectation unchanged

RHB cited that their view on the central bank’s tightening of monetary policy in April 2023 remains unchanged. 

Amongst the reasons are the core inflation could persist above symbolic 2% handle, Singapore Dollar Nominal Effective Exchange Rate (S$NEER) may be strengthened significantly since policy makers’ decision to recentre the band last 14 October, and other upside risks in Singapore’s inflation such as unexpected shocks to global prices.

“We keep our headline and core inflation outlook unchanged at 5.8% and 3.8% in 2022, respectively,” RHB said.