Singapore’s Inflation Rate Slows Down
A Breather for Monetary Policy?
Singapore’s core consumer price index rose 1.9% in November, a slower pace than economists had predicted and the smallest increase in nearly three years, according to official data released on Monday. This downward trend in inflation has created room for the country’s central bank to reassess its monetary policy.
Lower-than-Expected Inflation Rate
The core inflation rate, which excludes private road transport and accommodation costs, came in lower than the 2.1% forecast by a Reuters poll of economists. In fact, it was the smallest rise since November 2021, when it climbed by 1.6%. Headline inflation also fell short of expectations, rising 1.6% in annual terms in November, compared to the 1.8% predicted in the poll.
Monetary Authority’s Forecast
The Monetary Authority of Singapore had forecast core inflation to be around 2% in the fourth quarter. While slowing inflation might provide an opportunity for the central bank to ease monetary policy, analysts believe it may wait until later in 2025, given the uncertainty surrounding incoming U.S. President Donald Trump’s policies.
Central Bank’s Stance
The Monetary Authority of Singapore has maintained its monetary policy settings unchanged since October 2022, despite growth picking up and inflation declining. In fact, the trade ministry recently raised its GDP growth forecast for 2024 to 3.5% from a previous range of 2.0% to 3.0%, following a stronger-than-expected third-quarter growth of 5.4%.
Economists’ Expectations
Most economists polled in a recent MAS survey expect the central bank to maintain its current monetary policy in its quarterly reviews in January, April, and July. However, a third of those polled anticipate a January easing via a reduction in the slope of the Singapore dollar nominal effective exchange rate, down from half in the previous survey.
What’s Next?
As the Monetary Authority of Singapore weighs its options, one thing is clear: the slowing inflation rate has given it some breathing room to reassess its monetary policy. Will it take advantage of this opportunity, or will it wait and see how global events unfold? Only time will tell.
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