Passing the bucket: Broad-based price hikes loom in 2015

Tepid growth momentum also in sight.

Singapore’s inflation spiked to 2.5% in April 2014. This is higher than 1.2% from a year ago, but even the sharp rise fell short of expectation. 

Even wider price increases are on the horizon for 2015, coupled with a lukewarm growth momentum and high inflationary pressure.

According to the DBS, “Our inflation forecast for 2015 remains unchanged at 2.8%. Domestic cost pressure, stemming from the labor crunch, will remain a primary source of inflation. And firms are expected to continue to pass on accumulated costs to consumers, leading to broad-based price increases across the economy.”

Here’s more from DBS:

Latest core inflation (CPI inflation minus private transport and accommodation costs) registered 2.3% yoy. This is the highest since Sep 12 and it appears that it will continue to rise.

Although the growth momentum may be tepid, inflationary pressure will stay high. The focus of the exchange rate policy is still on inflation rather than growth. As such, the MAS is expected to maintain its current exchange rate policy stance of a gradual appreciation of Sing NEER to guard against the rising cost pressure.