Nomura raises inflation outlook to 3.3% this year 

MAS likely to keep policy settings unchanged.

Nomura has revised its outlook for Singapore’s core inflation this year to 3.3% from 3% previously after prices rose faster than expected in February.

In a note last week, analysts at the firm said they took into account the higher-than-anticipated inflation print in the first two months of 2024 which averaged 3.4%. Core inflation is forecasted to average 3.4% through the third quarter, before easing to 3% in the fourth quarter.

The latest forecast is near the upper end of the Monetary Authority of Singapore’s forecast range of 2.5% to 3.5%, and higher than the consensus forecast of 3%.

“Sticky core inflation reflects our view that the GST tax hike – along with the hikes in transportation costs and electricity tariffs over the past few months – will still likely compound persistent underlying pressures (including from higher labor costs) and a likely more significant pass-through, owing to the robust economic growth rebound we expect this year.

Singapore’s core inflation picked up to a 3.6% increase in February, faster than the 3.1% in January, and surpassed market estimates.

READ MORE: Inflation rises in February

For headline inflation, Nomura kept its 2024 forecast unchanged at 2.5%, lower than the market consensus of 3.1% and at the bottom end of MAS’ official forecast range of 2.5% to 3.5%. The estimates were left untouched due to declining COE premiums, easing home rents and increasing housing supply.

“We believe the MAS will likely leave its policy settings unchanged through 2024,” the experts said in the note.”That said, market concerns about the MAS tightening its FX policy in the latter part of the year may rise slightly now, and we assess that the probability of this occurring remains relatively low this year.”