Singapore revises inflation forecast as core prices near 8-year high

A view of residential properties in Singapore on November 17, 2020. REUTERS/Edgar Su

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  • Core inflation in December +2.1% vs. economist forecasts +1.7%
  • December general prices +4.0% vs. economists forecast +3.75%
  • The government sees significant uncertainty in the near-term inflation outlook

SINGAPORE, Jan 24 (Reuters) – Singapore is revising its official inflation forecast, authorities said on Monday, after data showed its main price gauge rose in December at the fastest pace in nearly eight years, due to a sharp increase in airfares.

The core inflation rate – the central bank’s preferred price measure – hit 2.1% in December on an annual basis, the highest since July 2014 and beating economists’ forecasts. A Reuters poll of economists predicted a 1.7% increase.

Singapore’s central bank tightened monetary policy in October, the first time in three years, amid mounting cost pressures. Its next policy review is due in April, when economists expect it to tighten further.

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Monday’s data showed headline inflation rose by 4%, a nearly nine-year high, beating economists’ forecasts of 3.75%.

Sharp increases in airfares and the costs of COVID-19 testing under Singapore’s quarantine-free travel programs were a major factor in December’s price spike.

There remains a great deal of uncertainty about the near-term inflation outlook, particularly due to the costs of air travel and the prices of basic commodities such as food and oil, said the Monetary Authority of Singapore (MAS) and the Department of Trade and Industry (MTI) in a statement.

“Given recent stronger than expected inflation results, including the sharp rise in airfares, MAS and MTI are reviewing the current forecast ranges for CPI-All Items inflation and MAS core inflation in 2022” , they said.

The government had previously forecast that headline prices in 2022 would average 1.5-2.5% and core inflation would rise to 1-2%. For 2021, core inflation stood at 0.9% and headline prices reached 2.3%.

Inflation is rising around the world as economies recover from the pandemic, creating demand at a time when transportation bottlenecks are leading to shortages of various products and goods.

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Reporting by Aradhana Aravindan in Singapore Editing by Ed Davies

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