Singapore’s Inflation Rate Drops to 1.4% in October
The city-state’s headline inflation rate took a surprising turn in October, falling to 1.4% from September’s 2%. This marks the first time the rate has dipped below 2% since March 2021. Economists had predicted a rate of 1.8%.
Slowing Car Prices and Rent Hikes Contribute to Decline
The main contributors to this decline were the dropping cost of cars and a slower pace of rent price increases. The consumer price index (CPI) rise was also lower than expected.
Core Inflation Rate Sees a Dip
Singapore’s core inflation rate, which excludes accommodation and private transport prices, came in at 2.1%. This is a decrease from September’s 2.8% and lower than the predicted 2.5%. The slowdown in service inflation and prices of essential items like electricity, gas, medicine, and clothing contributed to this dip.
Monetary Policy Takes a Different Approach
Unlike many countries, Singapore doesn’t rely on benchmark interest rates to set its monetary policy. Instead, the Monetary Authority of Singapore (MAS) manages the exchange rate of the Singapore dollar to stabilize prices and achieve healthy growth. The Singapore dollar fluctuates within an undisclosed policy band against the currencies of the country’s trading partners, allowing the MAS to adjust the slope, width, and level of the band.
Economic Growth Surges
On a positive note, Singapore’s economy expanded 5.4% year on year in the third quarter, surpassing the official advance estimate of 4.1%. This marks the city-state’s highest quarterly growth since the fourth quarter of 2021. The government has also raised its projection of this year’s economic growth to “around 3.5%,” up from “2.0 to 3.0%.”
Singapore Dollar Strengthens
Following the inflation reading, the Singapore dollar strengthened by 0.13% against the U.S. dollar, trading at 1.34. This suggests that the country’s economic growth and stable prices are having a positive impact on its currency.
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