Low inflation in Singapore unlikely to hold in 2Q24

In March, inflation fell to 2.7%.

An economist said Singapore's lower-than-expected inflation in March may not persist into the second quarter, given higher commodity prices globally.

In a report, RHB noted that it is already observing evidence of "higher food, energy, and metal prices this quarter, which may introduce upside risks to Singapore's imported inflation."

RHB  added that the March inflation was not due to lower demand conditions. 

RHB highlighted that empirical inflation for household durables & services, housing & utilities, and miscellaneous goods & services was either higher than or close to earlier forecasts.

RHB further emphasised, "The data reinforces our view that Singapore’s growth momentum will continue to accelerate as indicated by our proprietary GDP leading indicator. This view is supported by our global growth assumptions, which forecast above-consensus GDP figures for the US and China in 2024."

Rather than lower demand conditions, RHB believes the milder inflationary pressures to date were likely due to a relatively stronger Singapore Dollar Nominal Effective Exchange Rate (S$NEER).

Whilst RHB suggests maintaining current monetary policy parameters unchanged for the year, UOB anticipates potential adjustments. 

UOB projects that the continued transmission of imported disinflation into Singapore’s core Consumer Price Index (CPI) could lead to a normalisation of monetary policy. 

The adjustment might include a slight reduction in the policy slope by 50 basis points as early as the July monetary policy statement.