Singapore: Further MAS tightening likely on elevated inflation – UOB

Barnabas Gan, Economist at UOB Group, comments on the latest release of inflation figures in Singapore.

Key Takeaways

“Singapore’s consumer prices rose at its fastest rate since Feb 2013 at 4.3% y/y (+0.9% m/m nsa) in Feb 2022, due to higher food and oil prices. This is slightly higher compared to market expectations for a 4.2% y/y print. Core inflation decelerated to 2.2% in the same month (Jan: +2.6% y/y).”

“Headline inflation has climbed for six straight months, suggesting that inflation risks stay magnified. Meanwhile, core inflation is above the 2.0% handle for the third straight reading. The authorities have kept their headline and core inflation outlook unchanged at 2.5 - 3.5% and 2.0 - 3.0% respectively.”

“On the back of higher consumer prices, we have upgraded our inflation outlook to average 3.5% in 2022 in our UOB 2Q22 Quarterly Report. Coupled with the strong S$NEER seen at the time of writing (1.91% above the mid-point), we maintain our call for MAS to “slightly” steepen the S$NEER gradient in April 2022 while there is also a material risk for the MAS to recentre its policy band higher.”