Singapore May inflation slows to 5.0%
SINGAPORE: Singapore’s inflation slowed to 5.0 percent in May from a year ago and authorities cited moderating price pressures from wages and other business costs, indicating the central bank might have room to ease monetary policy slightly in October.
The May inflation was slightly below the median estimate of 5.1 percent of 11 economists polled by Reuters and a sharp improvement over April’s 5.4 percent, the highest rate in 2012.
Central banks in the Philippines, New Zealand, Thailand, Indonesia, India and South Korea held rates this month, while China and Australia chose to cut benchmark interest rates as growth concern increased and inflationary pressures eased.
Singapore’s inflation has, however, remained high compared with other Asian countries due to a shortage of homes and to measures to cap the number of motor vehicles on the roads, which sent car prices spiralling higher.
The government has also made it harder for employers to bring in cheaper foreign workers, putting upward pressure on salaries for low-skilled workers such as waiters and construction workers.
MAS and MTI reiterated their forecast that inflation will ease in the second half to come in between 3.5 and 4.5 percent this year. Core inflation, which excludes accommodation and private road transport, will likely be in the range of 2.5 to 3.0 percent, they added.
Singapore manages monetary policy by letting its dollar rise or fall in a undisclosed band against a secret trade-weighted basket of currencies. MAS, whose current stance is for a modest and gradual appreciation of the Singapore dollar, will release its next half-yearly policy statement in October.
MAS and MTI said accommodation will remain the largest contributor to inflation this year as leasing contracts continue to be renewed at rentals that are considerably higher than existing agreements.
They also said car prices will remain elevated due to the tighter supply of “certificates of entitlement” (COEs) that motorists must bid for before they can buy a vehicle. For the month of May, the cost of private road transport soared 10.3 percent from a year ago.
According to a recent report by the Manpower Ministry, average monthly earnings in Singapore fell 3.9 percent year-on-year in the first quarter after adjusting for inflation, worsening from a 1.4 percent decline in the last three months of 2011.
An MAS survey earlier this month showed the median estimate of economists was for inflation to come in at 4.2 percent for the whole of 2012, which is near the top end of the government’s forecast range. reuters