Food price inflation threatens Singapore

10 per cent of the headline CPI in 2010 was contributed by food prices and it is one of the main drivers of the high CPI inflation.

According to Moody's Analytics, structural food price inflation can quickly spill over into broader price pressures, dislodging expectations, prompting increased wage demands, and degenerating into a growth-sapping wage-price spiral.

Policymakers cannot ignore food price inflation as a transitory supply-side phenomenon.

Food security is a primary reason countries are setting up foreign food banks. Singapore’s purchase of a large area on China’s northern coastline is for the sole purpose of producing food to export to Singapore.

Monetary policy has a role to play in tempering food price inflation pressures, particularly in preventing elevated food prices from spilling over into broader inflationary pressures.