Chart of the Day: Singapore’s inflation numbers to remain in the red until 3Q15

Domestic growth is still weak.

Both core and headline prices will likely fall over the next few months, before low base effects near the end of 3Q15 allow for CPI to pick up in y-o-y terms.

According to a report by HSBC, Singaporeans will likely see the disbursement of housing rebates for Housing Development Board (HDB) dwellings in April, in addition to other budget measures.

Meanwhile, underlying inflationary pressures from the economy are subsiding as domestic growth weakens in 2015. Analysts forecast growth at 2.6%, compared to 2.9% in 2014.

HSBC adds that the tone of the CPI release largely reflected the more hawkish view on inflation in the April MPS, reiterating official expectations of higher wage-induced inflation ahead.

Accordingly, analysts believe the MAS does not have an easing bias and will refrain from further changes to the SGDNEER band this year.

That said, core and headline CPI should moderate further over the next couple of months as the disinflationary measures in the FY2015 budget are implemented and underlying growth in the economy slows.