Singapore prices rose at same pace in September

ECONOMISTS say that headline inflation for the month of September is roughly in line with the consensus, even as core inflation edged up slightly higher.

Nomura economists Euben Paracuelles and Brian Tan said that the upside surprise was core inflation, which went up to 1.5 per cent year on year in September from 1.4 per cent in August, slightly above the 1.4 per cent consensus forecast.

UOB economist Francis Tan said that core inflation has continued on a stable trend and the MAS (Monetary Authority of Singapore) inflationary expectations "provided confidence that the Oct 14 monetary policy decision to maintain the existing neutral S$NEER slope will be sufficient and accommodative in the current growth-inflation environment".

He added that the next six months leading to the next monetary policy decision in April 2018 will be critical to ascertain the need to kickstart the normalisation of the S$NEER policy towards a mild appreciation path.

For 2018, Maybank economists Chua Hak Bin and Lee Ju Ye expect headline and core inflation to rise to 1.2 per cent and 1.7 per cent respectively, driven by a cyclical economic recovery and rising services and commodity prices. They expect the MAS to normalise and shift to a slight appreciation bias in the April 2018 meeting.

In the latest joint release by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry, Singapore's headline inflation for the month of September stood at 0.4 per cent year on year, unchanged from the previous month.

This was attributed to higher services inflation, which offset the fall in private road transport inflation.

MAS core inflation, which excludes the costs of accommodation and private road transport, was higher at 1.5 per cent year on year in September, compared to 1.4 per cent in August, due to an increase in services inflation.

Services inflation rose mainly due to a faster pace of increase in telecommunication services fees, which more than offset a smaller rise in holiday expenses and a larger decline in air fares.

For 2017, core inflation is expected to be around 1.5 per cent, and average one to 2 per cent in 2018. Headline inflation is projected to come in at around 0.5 per cent this year, and stay in the range of zero to one per cent next year.

"Accommodation costs will continue to dampen CPI-All Items inflation (headline inflation) in 2018, albeit to a lesser extent than this year, while the positive contribution of private road transport costs will fall, in part reflecting the dissipation of inflationary effects from previous administrative measures," said the release.