Photographer: Nicky Loh/Bloomberg

Singapore's Inflation Slows Ahead of MAS Policy Decision

Singapore’s inflation slowed in August, matching the weakest pace this year, and testing the Monetary Authority of Singapore ahead of its semi-annual policy decision in October. 


  • CPI rose 0.4% from year earlier (est. 0.6%); Singapore Department of Statistics previously reported CPI rose 0.6% year-on-year in July 
  • Prices climbed 0.3% from prior month
  • Core inflation increased 1.4% from August 2016 (est. 1.6%); this is a measure monitored by the MAS, which excludes private road transport and accommodation

Key Takeaways

The MAS, which uses the exchange rate as its main tool, has kept its policy stance unchanged since April 2016. The central bankers said at their April meeting this year that they would stick to a neutral stance for an “extended period” of time. Economists are watching closely for any tweaks to the language while also monitoring data that might give the central bankers reason to consider tightening measures.

While the Singaporean economy has been recovering, the strength primarily has been due to a pickup in exports. Consumer spending and the labor market remain weak.

“Overall, domestic sources of inflation remain relatively muted,” the MAS and Ministry of Trade and Industry said in a joint statement after the data, repeating language they issued in August. “Conditions remain slack in the labor market and this is expected to dampen underlying wage pressures, even as commercial and retail rents have continued to ease.”

Economists’ Takeaways

  • “The inflation data once again confirms that weak domestic demand is weighing on the pricing power of the corporate sector and that there is little reason for the Monetary Authority of Singapore to relinquish its currently neutral exchange rate policy stance,” Sanjay Mathur, chief economist for Southeast Asia and India at Australia & New Zealand Banking Group Ltd. in Singapore, said in a research note following the report.
  • “We expect the broader economy, excluding semiconductor manufacturing, and the labor market to remain weak, so underlying inflation pressures should remain limited,” economists at Nomura Group said in an email. “The MAS reiterated its view that inflation will mainly be driven by supply-side factors like energy and administered prices rather than demand-pull pressures, which suggests there is little urgency to tighten monetary policy in the near term.”

Other Details

  • Housing and utilities, which make up a quarter of consumer price basket as the heaviest-weighted category, fell 2.3% in year ended in August
  • Education and health care showed the fastest rates of inflation, at 2.7% and 2.5%, respectively
  • MAS and MTI are looking for core inflation to average 1% to 2% for all of 2017, compared with 0.9% last year
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