Core inflation in Singapore accelerated faster than expected to the highest in a decade, in sync with the central bank’s projections that price growth might worsen before it gets better on geopolitical shocks and supply-chain backlogs.
The core consumer price index (CPI) tracked by the Monetary Authority of Singapore (MAS) — which excludes private transport and accommodation costs — rose 2.9 percent last month, on the back of costlier food and services. That is the fastest since March 2012 and is showing a quickening for the past eight of nine months.
That compares with the median forecast in a Bloomberg survey for a 2.5 percent increase, and the 2.2 percent pace in February.
“External inflationary pressures have intensified amid sharp increases in global commodity prices and renewed supply chain disruptions driven by both the Russia-Ukraine conflict and the regional pandemic situation,” the MAS and the Singaporean Ministry of Trade and Industry said in a joint statement yesterday. “MAS core inflation is forecast to pick up further in the coming months, before moderating towards the end of the year as some of the external inflationary pressures recede.”
Singapore’s headline inflation last month rose by 5.4 percent from a year earlier, compared with estimates for a 4.7 percent increase and February’s 4.3 percent.
Among drivers of the all-items index were transportation costs, which picked up at the fastest pace since 1980.
The MAS and ministry reiterated estimates that core inflation should be between 2.5 and 3.5 percent this year, while headline inflation runs within 4.5 and 5.5 percent.
The figures followed the central bank’s decision earlier this month to tighten monetary policy for a third time since October last year, as it warned inflation pressures remain a risk in the medium term.
Singaporean officials have recently been warning that the inflation could be longer-lasting as part of a new economic reality, beyond immediate supply and demand shocks.
Tharman Shanmugaratnam, MAS chairman and a senior minister, said at a Boao Forum for Asia event on Friday that “we are dealing with a fundamentally new macroeconomic environment globally.”
The new environment requires big spending on new supply capacity, mobilizing and “de-risking” private capital to invest in emerging economies, and raising taxes in both advanced and emerging economies, Tharman said.
Separately, the Bank of Korea should stay on a path to policy normalization as inflation remains a more pressing concern than a slowdown in economic growth, Governor Rhee Chang-yong said.
“I’m more worried about inflation so far,” the newly installed governor said yesterday in his first meeting with media since taking office last week. “I’ll still need to look at the data to tell what the pace of interest-rate hikes should be.”
Rhee said last week in his parliamentary hearing that he favors higher interest rates unless there is a threat to the economic outlook.
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