MAS revises inflation forecast to 6-7%

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Source: http://www.channelnewsasia.com/stories/sin.../362437/1/.html

 

 

 

 

MAS revises inflation forecast to 6-7%

By Ng Baoying, Channel NewsAsia | Posted: 24 July 2008 1429 hrs

 

 

SINGAPORE: Singapore's central bank has revised up its inflation forecast for 2008 for the third time. It now expects inflation to come in at between 6 and 7 per cent from its initial estimate of 5 to 6 per cent.

 

The Monetary Authority of Singapore (MAS) said this is due to the impact of external developments like higher oil and food prices on Singapore's open and trade-dependent economy.

 

The central bank, however, is maintaining its current monetary policy stance for a slow and gradual appreciation of the Singdollar.

 

MAS believes that inflation in Singapore has peaked this year. Inflation has stayed unchanged for the previous three months, at 7.5 per cent - a 26-year high. For the first half of the year, consumer inflation averaged 7.1 per cent.

 

In the coming months, inflation is expected to moderate because the one-off impact of the GST hike last year will stop affecting headline inflation in July.

 

MAS also expects global commodity price increases to be milder. Domestic cost pressures are likely to ease as the economy slows and asset markets consolidate.

 

Recent employment surveys have also shown that labour market pressures could be easing.

 

While most economists agree that inflation will come off in July, they say what is key will be the rate at which it moderates.

 

Irvin Seah, economist at DBS Group Research, said: "It will decrease at a slower rate compared to what we thought so earlier, because of policy-induced inflationary pressure. Having said that, oil prices recently have shown signs of moderation. If that's sustainable in longer term, it means inflation could come off quite a fair bit."

 

Between April 2004 and June 2008, the Singapore dollar appreciated 23.4 per cent against the greenback