Posted on 13 Jun 2013
Singapore's inflation for 2013 is expected to come in below the central bank's forecast of 3%-4%, a survey of economists by the central bank showed, in a sign rising prices have become less of a concern after two years of elevated cost pressures.
The Monetary Authority of Singapore's (MAS) latest quarterly Survey of Professional Forecasters found that economists now expect the city-state's consumer price index (CPI) to rise by 2.8% this year, a full percentage point below the median estimate of a 3.8% gain in the previous poll.
But inflation is expected to pick up again in 2014 to 3.1%, the survey showed.
Thus many forecasters believe the central bank will continue to keep monetary policy tight when it publishes its next half yearly policy statement in October.
“Even though inflation will be lower than last year's average, it's still on the high side relative to historical trends so there shouldn't be any changes in the October policy,” said Francis Tan, an economist at Singapore's United Overseas Bank.
Tan said the MAS had indicated core inflation would pick up later this year, and he noted that car prices had begun edging higher after falling in March and April as a result of tougher financing rules.
The MAS' core inflation measure, which excludes housing and private car prices that are more influenced by government policy, will likely come in at 1.8% this year, down from the previous median estimate of 2%.
But the survey also showed economists expect core inflation will edge up to 2% next year.
Singapore manages monetary policy by letting the local dollar rise or fall against a basket of currencies. The current policy stance was for a modest and gradual appreciation of the Singapore dollar, whose recent decline against the dollar was more a reflection of the US currency's strength, Tan said.
The South-East Asian city-state, a key Asian financial centre, has been grappling with slow growth and relatively high inflation in recent years.
But the inflation outlook has improved with the CPI rising by just 1.5% in April from a year earlier the lowest gain in more than three years as falling car prices and government rebates kept a lid on prices.
