ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Economy

Singapore's inflation data lift odds of April pause by MAS

Central bank says external sources of price pressures have receded

Singapore's economy ended last year on a downbeat note, growing by just 1.9% year on year in the final three months, the slowest pace since the third quarter of 2016.    © Reuters

SINGAPORE (Nikkei Markets) -- Singapore consumer prices rose less than expected in February, giving the central bank more room to align itself with its regional peers and stand pat when it reviews monetary policy next month.

According to the Department of Statistics, the consumer price index rose 0.5% in February from a year ago, edging higher from January's 0.4% with private road transport and accommodation costs declining at a more gradual pace.

The increase was lower than the 0.6% estimated in a Reuters poll.

Core inflation, which excludes private road transport and accommodation as they are heavily influenced by government policy, eased to 1.5% from 1.7% in January. Prices of services, retail items, and electricity and gas rose at a slower pace during the month. Economists had expected February's core inflation to pick up to 1.9%.

In a joint commentary on Monday's data, the Monetary Authority of Singapore and the Ministry of Trade and Industry said external sources of inflation have receded in line with the sharp drop in global oil prices during the fourth quarter of last year.

The benign view of imported inflation contrasts with comments made in the October policy statement, when MAS said costs are likely to increase due to higher global oil and food prices. That view raised expectations of a third consecutive round of policy tightening in April.

Unlike most central banks, which stimulate or slow economic activity by adjusting interest rates, MAS sets policy by letting the local dollar rise or decline against an undisclosed basket of currencies. The central bank announces its policy stance twice each year, in April and October. Its current stance is to let the Singapore dollar appreciate around an estimated 1% annual pace.

Although supportive labor market conditions should underpin wage growth and continuing price pressures, inflation will be capped by greater competition in consumer segments such as telecommunications, electricity and retail, MAS and MTI said.

The two government agencies kept their core inflation forecast for 2019 at 1.5% to 2.5%, and the outlook for headline inflation at 0.5% to 1.5%.

"MAS policy action in April remains a close call, but we lean slightly toward standing pat," Citi economist Kit Wei Zheng said in a note after the February data.

Jingyang Chen, an HSBC economist in Hong Kong, said the moderation in core inflation, combined with the relatively broad-based deterioration in the growth outlook would stay the MAS's hand.

Singapore's economy ended last year on a downbeat note, growing by just 1.9% year on year in the final three months, the slowest pace since the third quarter of 2016. The fourth-quarter growth was also well below the government's own advance estimate of 2.2%.

The growth slowdown, and the weakening inflation outlook, come amid signs of softness in the global economy.

Last week, the U.S. Federal Reserve warned that economic activity has slowed and said it had no plans to hike interest rates for the rest of this year. The Philippines and Indonesia kept rates on hold, while Malaysia reported its second straight month of falling prices.

Singapore's advance estimates of first-quarter growth are due on the same day as the monetary policy statement.

--Kevin Lim

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends June 30th

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media