Singapore Inflation Soars on Steeper Food, Energy Prices

(Bloomberg) — Singapore’s key core inflation measure climbed to the highest level in almost 14 years last month, heaping pressure on monetary policy makers to do more to fight price gains.

The core inflation gauge, which excludes private transport and accommodation, rose 4.8% in July from a year ago, according to a joint statement from the Monetary Authority of Singapore and the Ministry of Trade and Industry on Tuesday. That was the highest since November 2008 and compares with the 4.7% median estimate in a Bloomberg survey.

Headline inflation surged to 7% from 6.7% in June, the highest level since June 2008. The print was in line with the Bloomberg survey median.

MAS officials, who use the exchange rate as their main policy tool rather than a benchmark interest rate, have said they expect the core inflation measure to peak in the third quarter before ebbing slightly toward year-end. The central bank has already tightened policy thrice this year, and will possibly be forced to do more at its scheduled October meeting or before if the situation worsens.

For the full year, the MAS reiterated projections for the core gauge to come in at between 3% and 4%, with the all-items measure seen at 5%-6%.

That outlook compares with inflation forecasts in the latest Bloomberg survey this month that showed economists expect core price growth to peak in the final quarter of this year, while headline inflation will start to ebb after the third quarter. The analysts saw 2022 core inflation at 4% and headline at 5.6%, according to the survey medians.

What Bloomberg Economics Says…

Another sizable rise in Singapore CPI inflation in July, after a 0.9-percentage-point pickup in June, builds the case for the Monetary Authority of Singapore to tighten policy again at its next meeting in October.

— Tamara Henderson, Asean economist

For the full note, click here

While not a consensus view, analysts at Barclays Plc and Nomura Holdings Inc. are penciling in a re-centering of the policy band before the October meeting.

“Top of everyone’s minds is the cost of living,” Singapore Prime Minister Lee Hsien Loong said in a National Day Rally speech Sunday. While the MAS manages a careful strengthening of the local currency, the government is doing “everything necessary” especially to aid the most vulnerable households coping with inflation, and will “stand ready to do more” if the outlook worsens, he said.

The government has repeatedly addressed the need to cushion the poorest households from relentless inflation pressure, announcing in June a S$1.5 billion ($1.1 billion) package that included direct payments and household utilities rebates.

(Updates with chart, BE economist comment after the fourth paragraph, and price details in box.)