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Quick takes: Fall in Singapore consumer prices unlikely to prompt monetary policy change: economists

SINGAPORE'S headline inflation rate for May came in exactly as the market had anticipated, at -0.4 per cent, due to higher Certificate of Entitlement (COE) premiums.

But core inflation eased to 0.1 per cent last month - far lower than earlier expectations of a 0.4 per cent reading - thanks to lower services and food inflation.

Still, private-sector economists do not see Singapore's central bank changing its monetary policy stance come October. Here's what they had to say about the latest data, released by the Department of Statistics on Tuesday:

ANZ economists Daniel Wilson and Glenn Maguire: "Though the MAS (Monetary Authority of Singapore) maintained their 0.5 to 1.5 per cent year-on-year core inflation forecast, and -0.5 to 0.5 per cent headline forecast, there is a growing risk core inflation undershoots their projection and they will be forced to downgrade their range again. Our current models are now pointing towards headline averaging -0.4 per cent and core at 0.45 per cent for the year.

"However, it is also important to note that the supply side is the driving force behind these declines: government budget measures, lower global commodity prices, increased COEs (Certificates of Entitlement) and property supply ... Therefore, although there is a risk that the MAS forecast is downgraded, we still believe the hurdle for policy changes is quite high. GDP growth will need to underperform, and current data suggests a steady profile."

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Barclays economists Leong Wai Ho and Bill Diviney: "While 2015 average core inflation is likely to come in at the lower end of the MAS's forecast range of 0.5 to 1.5 per cent, with the labour market remaining tight, we believe the MAS will continue to look through the supply-side driven falls in inflation and focus on the prospects for the medium term.

"Meanwhile, core is likely to hit an inflection point in Q3, as the oil price recovery feeds through to utility tariffs, while food prices face upside risks from El Nino, which could hit regional agricultural output. Against this backdrop, we continue to expect the MAS to keep policy on hold in October, and would only expect a change in the event of a significant darkening in the growth outlook."

Citi economist Kit Wei Zheng: "While MAS and MTI's (Ministry of Trade and Industry) expectation that inflation will pick up only 'towards the end of the year and into 2016' seems to downplay the low inflation prints in Q3, any material downside surprise in Q2 job creation versus MAS's expectation of a pick-up may raise the risk of a MAS easing in Oct, or at least reignite market expectations of such a move."

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