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Singapore's core inflation rises further to 5.3% in September, edging towards 14-year high

The figure is expected to stay elevated before slowing in the second half of 2023, say MAS and MTI.

Singapore's core inflation rises further to 5.3% in September, edging towards 14-year high
Pedestrians cross a street in Chinatown on Nov 17, 2021. (File Photo: CNA/Calvin Oh)

SINGAPORE: Singapore's core inflation rose further to 5.3 per cent in September, driven mainly by larger increases in the prices of food, services and retail and other goods, official data showed on Tuesday (Oct 25).

This is higher than the 5.1 per cent in August as the inflation figure inches towards a 14-year high.

The last time Singapore reported higher year-on-year core inflation growth was in November 2008, when it stood at 5.5 per cent.

Core inflation excludes accommodation and private transport costs. 

The headline consumer price index, or overall inflation, was 7.5 per cent year-on-year in September, unchanged from August.

"Core inflation is projected to stay elevated in the next few quarters before slowing more discernibly in (the second half of) 2023 as the current tightness in the domestic labour market eases and global inflation moderates," said the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) in a joint media release.

Food inflation came in higher due to steeper increases in the prices of both food services and non-cooked food, hitting 6.9 per cent in September.

Accommodation inflation also picked up alongside a faster pace of increase in housing rents, hitting 4.9 per cent in September.

Services inflation rose to 4 per cent in September as the cost of point-to-point transport services and holiday expenses saw a larger increase. 

Private transport inflation fell to 22.3 per cent from 24.1 per cent in August due to a slower pace of increase in car and petrol prices. 

Prices of retail and other goods also registered a faster pace of increase, coming in at 3.1 per cent in September, as inflation for telecommunication equipment, medicines and health products and other personal care products edged up. 

Meanwhile, inflation for electricity and gas remained at 23.9 per cent, unchanged from August. 

For the full year, overall inflation is expected to average 6 per cent, while MAS core inflation is projected to come in at around 4 per cent.

In 2023, taking into account all factors including the Goods and Services Tax (GST) increase, headline and core inflation are projected to average 5.5 per cent to 6.5 per cent and 3.5 per cent to 4.5 per cent respectively, said the agencies.

Excluding the transitory effects of the GST hike, headline and core inflation are expected to come in at 4.5 per cent to 5.5 per cent and 2.5 per cent to 3.5 per cent respectively.

MAS and MTI also noted increasing risks to the inflation outlook, "including from fresh shocks to global commodity prices and more persistent-than-expected external inflation".


Singapore's imported inflation is expected to remain significant for some time due to global conditions, said MAS and MTI.

In a note on the inflation outlook, they pointed out that global demand conditions in major economies and supply chain frictions have continued to ease; and that prices of energy and food commodities have come off their peaks from earlier in the year - but remain high given ongoing supply constraints.

"In addition, labour markets in major advanced economies are still tight, keeping wage pressures strong," said MAS and MTI.

"On the domestic front, unit labour costs will increase further in the near term alongside robust wage growth."

The cost of utilities is also likely to remain elevated and firms are expected to continue to pass on accumulated import, labour and other business costs to consumer prices, the authorities added.

In June, the Government announced a S$1.5 billion support package to provide immediate relief from rising inflation to those who would be most affected. 

“The support measures in this package are tilted towards helping our lower-income and vulnerable groups because they are the ones who are disproportionately impacted by the effects of inflation,” said Deputy Prime Minister and Finance Minister Lawrence Wong then.

Some key measures include a one-off GST Voucher cash special payment of up to S$300 for eligible Singaporeans, as well as a S$100 rebate on utilities for all Singaporean households.


Following the data release, private-sector economists said they are keeping their inflation forecasts for 2022 unchanged.

Maybank economists, for example, expect core inflation to come in at 4.2 per cent for the year, while headline inflation to be at 6.2 per cent.

“The wage-price spiral may intensify in the coming quarters, with the progressive wage model expanded to cover food services, waste management, and occupational sectors from Mar 1, 2023,” Dr Chua Hak Bin and Ms Lee Ju Ye wrote in a note.

“Accommodation costs will continue rising with the return of non-resident workers, delay in property completions and possibly higher demand from property sellers going through the 15-month HDB wait-out period,” they added.

RHB senior economist Barnabas Gan is pencilling in 3.8 per cent and 5.8 per cent for core and headline inflation, respectively.

With inflation indicators remaining elevated, economists expect the MAS to further tighten monetary policy at its next policy meeting scheduled for April 2023.

The central bank has thus far tightened monetary policy five times since last October, including two off-cycle moves, to help rein in inflation. 

Unlike most central banks that manage monetary policy through the interest rate, it uses the exchange rate as its main policy tool because Singapore is an open economy that depends heavily on trade. This refers to the S$NEER – the exchange rate of the Singapore dollar managed against a trade-weighted undisclosed basket of currencies from Singapore’s major trading partners.

It lets the exchange rate float within an unspecified policy band and changes the slope, width and centre of that band when it wants to adjust the pace of appreciation or depreciation of the Singapore dollar.

Its latest move on Oct 14 entailed a re-centring of the mid-point of the policy band “up to its prevailing level”.

Reasons for the MAS to retain its hawkish tone include how core inflation – a key gauge for the central bank – is set to persist above “the symbolic 2 per cent handle” from now until the first half of next year. This suggests that tighter monetary policy is needed to cushion price pressures, said Mr Gan.

Upside risks to Singapore’s inflation outlook, including unexpected shocks to global commodity prices and more persistent external inflation, remain. In addition, the S$NEER has seen a significant strengthening since the central bank’s latest tightening move.

Noting that the S$NEER has risen to 1 per cent above the midpoint in just over a week, “more appreciation headroom may be needed for a stronger Singapore dollar in response to the current inflation environment", Mr Gan wrote.

“We think that the MAS will further tighten its monetary policy in April 2023, possibly via a slight steepening of the S$NEER gradient by 0.5 per cent, while leaving the width and the level at which the S$NEER is centred unchanged.”

Maybank economists expect the central bank to go for another re-centring. 

“Our model suggests that the S$NEER is currently trading at about 1.1 per cent above the mid-point of the new re-centred band, with room left for further appreciation,” they said.

Source: CNA/vc(jo)


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