Lower-than-expected labour stats offset inflation risks

The core inflation forecast remains at 3.3%.

Singapore continues to face last-mile inflation risks due to the ongoing economic recovery and improving labour markets, potentially leading to a more significant pass-through of higher wage costs, Nomura said in a research note.

Despite some downside risks from lower-than-expected core inflation in June, factors like rising freight costs and lower-than-expected unemployment rates in the second quarter (Q2 2024) offset these risks.
On Wednesday, the Ministry of Manpower (MOM) reported an unemployment rate of 2.0% in Q2, narrower than the 2.1% in Q1. 

Employment (excluding migrant domestic workers; MDW) picked up substantially to 11.3k in Q2 from 4.7k in Q1.

The 2024 core inflation forecast remains at 3.3%, near the upper end of the Monetary Authority of Singapore’s (MAS) forecast range of 2.5% to 3.5% and above the consensus forecast of 3.0%. 

Given the economic conditions, MAS is likely to maintain its FX policy through 2024, with policy easing becoming more probable in early 2025 if the inflation outlook materialises.

Q2 labour market data also suggest that the economy is effectively in full employment, reinforcing the likelihood that MAS will avoid easing too early to prevent underlying inflation pressures from persisting.