MAS likely to keep restrictive slope amid rising imported inflation

Policy normalisation, however, could take place in October.

An economist expects the Monetary Authority of Singapore (MAS) to keep its restrictive slope settings for a while longer due to an uptick in imported and external inflation in recent months.

Jester Koh, UOB associate economist, underscored that any reacceleration of imported inflation, “particularly in the ‘food and live animals’ component could slow the progress of disinflation given food has a significant weight of 21.1% in the overall Consumer Price Index (CPI) basket.”

Koh mentioned that the ongoing gradual rise of the S$NEER on a positive policy slope is expected to curb imported inflation and domestic cost pressures, thereby anchoring the disinflation process. Still, a significant year-on-year decrease in core inflation is likely to be seen only in 1Q25, driven by base effects.

UOB expects MAS to commence policy normalisation through a slight slope reduction in the October 2024 Monetary Policy Statement but underscored that a July move is still possible.

In 2024, UOB forecasts core inflation to average 3.0% and drop to 1.6% in 2025, influenced by base effects. 

Additionally, it revised its 2024 average headline inflation forecast down to 2.5% from 2.8%, citing a substantial softening in private transport inflation due to a larger COE supply year-to-date.