Monetary Authority of Singapore (MAS) logo signage on the building at entrance. (Image by Mimisim /

Core inflation forecast dropped to 0.8% due to overall lower prices, says MAS and MTI

MAS Core Inflation eased to 0.8% on a year on year basis in July from one year ago, down from 1.2% in June said the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) in a joint statement on 23 August.

According to the release, this is mainly attributed to the decline in prices of retail and other goods, a larger decline in the cost of electricity and gas, and lower services inflation which it says more than offset higher private road transport inflation, as well as a smaller decline in accommodation costs.

The lower core inflation also resulted in the CPI-All items inflation declining by 0.4% in July which followed a previous decline on 0.2% in June from the previous month.

MAS Core Inflation is expected to come in within the lower half of the 1%–2% forecast range in 2019, said the statement. Core inflation is the preferred price gauge for the MAS.

Reuters quoted chief APAC economist at Moody’s Analytics Steven Cochrane as saying, “This is further evidence of the weakened condition of the economy.”

“This will likely raise expectations of monetary policy easing… Particularly as many central banks in the region have already begun to ease monetary policy,” he added.

The statement released by MAS and MTI noted that external sources of inflation for 2019 are “likely to be benign” with global prices for the full year not expected to exceed last year’s average.

Domestically, the statement highlighted that labour market conditions have largely held up, contributing to moderate wage increases and higher unit labour costs.

“However, an acceleration in inflationary pressures is unlikely against the backdrop of slower GDP growth, uncertainties in the global economy, as well as the continuing restraining effects of MAS’ monetary policy tightening in 2018,” it elaborated.

Last week, MAS reduced its GDP growth forecast for 2019 from 1.0% to 0.0%, estimating growth to fall somewhere in the middle. Minister for MTI Mr Chan Chun Sing said on his Facebook that the downgraded growth forecast was due to weaker global growth outlook and a downturn in electronics.

However, the minister put a positive spin on things, saying “We should brace ourselves for the challenges ahead but we need not be overly pessimistic. The fact that we continue to attract good investments reflects the confidence that investors have in our long-term value proposition.”

Reuters reports that the Singapore dollar weakened after this data was released, down 0.2% against the US dollar on the day.