Chart of the Day: Singapore’s inflation to pick-up in 2H15 amid slight recovery in oil prices

MAS’ policy settings still on hold in April.

Singapore’s central bank maintains a bearish outlook toward the oil price environment.

According to a report by HSBC, for headline CPI, the downside surprise materialized due to the sharp drop in CoE premiums, which offset the increase in petrol duties announced in the budget (note that higher petrol duties came into force on February 23). Meanwhile, the housing market continues to gradually deflate, and will likely continue to do so at a steady pace over the foreseeable future.

To summarize, analysts at HSBC think that on the margin yesterday’s data and accompanying release are quite neutral.

The upside surprise in core can largely be explained by the LNY-related base effect, while the phrasing suggests a slightly more bearish outlook, potentially in line with the view that core and headline inflation will come in on the bottom half of the forecast ranges.

HSBC maintains its view that the MAS is likely to maintain its core inflation forecasts in April, as it still expects a pick-up in 2H15. Accordingly, they expect the MAS to keep its policy settings on hold in April, while there is a risk that it may widen the band.