Analysts suggest more policy tightening to keep inflation in check

RHB and UOB said this is a precautionary measure if core inflation accelerates.

Brokers suggested that Singapore’s central bank should continue to tighten monetary policy if core inflation shows signs of reacceleration.

Singapore’s headline inflation went down 6.5% in December 2022 but core inflation was at 5.1%.

UOB said sources of core inflationary pressures were broad-based, but food and services and healthcare stood out as notable contributors.

Core inflation is seen to stay elevated in the first half of 2023 but will stay subdued in the second half as domestic labour market eases and global inflation moderates, said UOB.

RHB said the inflation risks and potential for more tightening of monetary policy of MAS in 2023.

It said momentum of inflation has slowed in Singapore and other key Asian economies, but that year-on-year rates remain elevated. 

To address these challenges, UOB and RHB said there needs to be more tightening, due to reasons such as core inflation will be above 2.0%, a stronger Singapore dollar, and potential risks from global geopolitical tensions and pandemics.