Sinking home prices, large COE supply to keep inflation subdued this year: report

Even as food and fuel prices rise.

Singapore's inflation is expected to grow by a measly 1% over the next 12 months, a report by BMI Research said.

According to BMI Research, the increase in food and fuel prices will be offset by the continued decline in home prices and the increased supply of Certificates of Entitlement (COEs), which in turn will cap transport cost increases.

"We do not expect inflation to increase rapidly as both the property market and car prices remain relatively weak. In particular, we believe that Singapore's residential property market will continue its gradual correction. Transportation cost increases will be capped as the certificate of entitlement (COE) market absorbs increased supply," the report said.

As a result, BMI Research expects the Monetary Authority of Singapore (MAS) to maintain its neutral policy at its upcoming April meeting.

"The beginning of the rate hiking cycle by the US Federal Reserve in end-2016 suggests that the MAS is unlikely to go against the global trend towards rising interest rates by loosening its monetary policy," the report noted.