Barclays senior regional economist Brian Tan similarly said that the pass-through of cost pressures, including from the goods and services tax hike, “has not only been manageable, but is also dissipating rapidly”.

MAS and MTI still expect core inflation to stay elevated in coming months before slowing “more discernably” in the second half.

A sharper-than-projected downturn in advanced economies remains a possible downside risk. But MAS and MTI flagged a specific new upside risk in the form of “more persistent-than-expected” labour market tightness.

OCBC chief economist Selena Ling similarly noted that the tight labour market may cause wage growth to lag the slowdown in inflation.

It may be necessary to “remain watchful”, as core inflation is “still vulnerable to being sticky on the downside”, she said. For instance, food inflation remains elevated due to raw ingredient prices and operating costs such as manpower.

Certificate of Entitlement prices recently hit a record high, and quota cuts for global oil production imply a “limited downside for crude oil prices from here”, Ling added.

Maybank economists Chua Hak Bin and Lee Ju Ye also cited labour market tightness as a reason to expect core inflation “to remain sticky and fall slowly”.

They kept their core inflation forecast at 4.5 per cent, on the upper end of MAS’ official range, even as they lowered their headline inflation forecast to 5.6 per cent from 6 per cent previously.

OCBC’s Ling expects both inflation measures to ease to below 5 per cent in the coming months.

UOB senior economist Alvin Liew maintained his full-year forecasts of 5 per cent for headline inflation and 4 per cent for core, while Barclays’ Tan kept his core inflation prediction at 3.9 per cent.

Following MAS’ pause on monetary tightening in April, bank economists do not anticipate further policy changes this year, including at the next scheduled meeting in October.

Overall, inflation slowed for most consumer price index categories in March, except electricity and gas.

The greatest slowdown was for private transport, where inflation eased to a single-digit pace for the first time in two years to 8.6 per cent, from February’s 12.1 per cent, due to a smaller increase in car prices and a steeper decline in petrol costs. The Maybank economists noted that oil costs were higher last year at the onset of the Russia-Ukraine war.

Accommodation inflation slipped marginally to 4.8 per cent from February’s 4.9 per cent, as rent increases slowed. This could be “music to some ears”, said Ling, given the “significant rental inflation in the past six to 12 months” in the “buoyant” private residential market.

For services, economists attributed slower inflation largely to a plunge in the cost of “other transport services”, which include air travel. This was due to the high base a year ago with mandatory Covid-19 tests for travel.

Point-to-point transport fares also eased to the slowest pace in a year, with the fading impact of fare hikes imposed by ComfortDelGro in March 2022, said Maybank’s Chua and Lee.

Food inflation eased with smaller price increases for prepared meals and non-cooked food – but to a still-elevated rate of 7.7 per cent.

“Food inflation has been incredibly sticky despite the decline in global food prices, partly because of higher labour costs,” said the Maybank team.

Source: https://www.businesstimes.com.sg/singapore/singapore-headline-core-inflation-ease-march-expected