Headline CPI of +2.7% YoY shows inflation still elevated after MAS cut forecast
Singapore May headline CPI released today showed ongoing upward pressure in all major areas except for clothing and communication, following a similar trend in April’s CPI reading. The May and April readings interrupted four straight months of subdued inflation readings (ranging from +0.4% to +1.5% YoY). Today’s data justifies the ongoing inflation vigilance of the Monetary Authority of Singapore (MAS) which reiterated its concern about upward wage pressures from labour market tightness (in spite of cutting headline CPI forecasts) at the April meeting. Notably, May CPI also showed a +2.4% MoM (+0.5% YoY) increase in housing costs, reversing the decrease in April. The MAS believes that additional upcoming housing supply will lower headline CPI to between 1.5% to 2.5% in 2014 (previous forecast: 2.0% to 3.0%); but it seems that supply factors have not yet impacted May’s prices. UBS Economics expects no policy change at the next MAS meeting in October (see “Singapore: Still worried about a tight labour market,” 14 April by Ed Teather). Although risks point slightly towards policy easing, CPI data has not yet justified any changes to the NEER policy band.
Read the full report: UBS