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PR Newswire
26-10-2010, 06:35 AM
Business Times - 26 Oct 2010
Inflation soars to 20-month high in Sept
Consumer price index rose by 3.7% in September from a year ago
By FELDA CHAY
SINGAPORE'S inflation rate raced to a 20-month high in September on higher housing, food, and transport costs, justifying the central bank's surprise monetary tightening earlier this month.
Data from the Department of Statistics showed that the consumer price index rose by 3.7 per cent in September from a year ago. On a seasonally adjusted basis, prices are also 0.2 per cent higher than in August.
Said DBS economist Irvin Seah: 'With overall inflation grinding steadily northward, risks are certainly tilting towards inflation rather than growth. Moreover, wages are rising as the labour market tightens and this is expected to have some knock-on effect on prices at some stage.'
Earlier this month, the Monetary Authority of Singapore (MAS) widened and steepened the trading band for the Sing dollar, making room for further gains.
The move came even as advance government estimates show that the economy likely shrank at a record annualised rate of 19.8 per cent in the third quarter from the previous quarter.
JPMorgan said that inflation is likely to continue rising further in the near term, though 'it currently appears to be something worth watching rather than a clear threat'.
'For one, the price rises have largely been seen in areas such as housing, energy, and transport - where a drop in the supply of COEs has pushed costs up.
'In other words, outside of housing prices, commodity costs, and COEs (for which there has been a decrease in supply), inflation looks relatively well contained.
'This is not to say that these price pressures are not important to consider, but more domestic-oriented 'core' type of pressures still seem contained in Singapore.'
In September, transport costs rose 9.1 per cent from a year ago, while food prices were 1.7 per cent higher. Housing costs rose 4.7 per cent.
'We expect inflation to rise further in coming months, but unless food and commodity prices experience another notable leg up, inflation should peak around 4 per cent before gradually heading lower around end of the year,' said JPMorgan in a note.
MAS has said that it expects inflation to reach 4 per cent by the end of this year. Its CPI inflation forecast for 2010 is between 2.5-3 per cent.
For the first nine months, inflation rose by 2.4 per cent over the same period last year, data released yesterday showed.
The central bank has said that it wants to cap inflation at 2-3 per cent next year - which may mean further monetary tightening ahead, though easing economic growth will help to moderate domestic inflation pressures.
Said Standard Chartered economist Alvin Liew: 'Assuming that inflation in 2011 is within the MAS target, we expect the central bank to keep policy steady in the April 2011 MPS.
'However, as inflationary concerns may deepen next year for Asia, we see a 40 per cent chance that the MAS will opt for further tightening next year, most likely via a one-off appreciation of the Sing dollar by re- centring the policy mid- point.'
Inflation soars to 20-month high in Sept
Consumer price index rose by 3.7% in September from a year ago
By FELDA CHAY
SINGAPORE'S inflation rate raced to a 20-month high in September on higher housing, food, and transport costs, justifying the central bank's surprise monetary tightening earlier this month.
Data from the Department of Statistics showed that the consumer price index rose by 3.7 per cent in September from a year ago. On a seasonally adjusted basis, prices are also 0.2 per cent higher than in August.
Said DBS economist Irvin Seah: 'With overall inflation grinding steadily northward, risks are certainly tilting towards inflation rather than growth. Moreover, wages are rising as the labour market tightens and this is expected to have some knock-on effect on prices at some stage.'
Earlier this month, the Monetary Authority of Singapore (MAS) widened and steepened the trading band for the Sing dollar, making room for further gains.
The move came even as advance government estimates show that the economy likely shrank at a record annualised rate of 19.8 per cent in the third quarter from the previous quarter.
JPMorgan said that inflation is likely to continue rising further in the near term, though 'it currently appears to be something worth watching rather than a clear threat'.
'For one, the price rises have largely been seen in areas such as housing, energy, and transport - where a drop in the supply of COEs has pushed costs up.
'In other words, outside of housing prices, commodity costs, and COEs (for which there has been a decrease in supply), inflation looks relatively well contained.
'This is not to say that these price pressures are not important to consider, but more domestic-oriented 'core' type of pressures still seem contained in Singapore.'
In September, transport costs rose 9.1 per cent from a year ago, while food prices were 1.7 per cent higher. Housing costs rose 4.7 per cent.
'We expect inflation to rise further in coming months, but unless food and commodity prices experience another notable leg up, inflation should peak around 4 per cent before gradually heading lower around end of the year,' said JPMorgan in a note.
MAS has said that it expects inflation to reach 4 per cent by the end of this year. Its CPI inflation forecast for 2010 is between 2.5-3 per cent.
For the first nine months, inflation rose by 2.4 per cent over the same period last year, data released yesterday showed.
The central bank has said that it wants to cap inflation at 2-3 per cent next year - which may mean further monetary tightening ahead, though easing economic growth will help to moderate domestic inflation pressures.
Said Standard Chartered economist Alvin Liew: 'Assuming that inflation in 2011 is within the MAS target, we expect the central bank to keep policy steady in the April 2011 MPS.
'However, as inflationary concerns may deepen next year for Asia, we see a 40 per cent chance that the MAS will opt for further tightening next year, most likely via a one-off appreciation of the Sing dollar by re- centring the policy mid- point.'
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