Full-year inflation forecast by MAS raised to 6-7%
INFLATION is now tipped to average out at between 6 and 7 per cent this year after the Government lifted its forecast for the third time this year.
The new estimate is 1 percentage point up from the previous range of 5 to 6 per cent. This is the biggest upgrade this year and comes as inflation averaged 7.1 per cent in the first six months.
The Monetary Authority of Singapore (MAS) cited the usual causes when it issued the new forecast yesterday - high crude oil and food prices and inflation pressures at Singapore’s trading partners.
But there is some good news: Price rises should now start moderating as domestic cost pressures in the labour and commercial property markets seem to be easing.
‘There are early signs…as the economy slows and asset markets consolidate,’ said MAS managing director Heng Swee Kiat. ‘The rate of increase in commercial rentals appears to have peaked. Recent surveys have also shown that employers have become more cautious about hiring.’
He said prices should rise on average between 4.9 and 6.9 per cent in the second half of the year.
Apart from slower cost increases at home, he said inflation ought to moderate as commodity prices should rise less sharply. The basis effects from last July’s goods and services tax hike will also wear off, he added.
Mr Heng said the ‘pre-emptive’ moves in April and last October to allow the Singdollar to appreciate faster has taken some of the sting out of costlier imports, and so restrained inflation.
‘While oil prices in US dollar terms have increased more than 70 per cent from a year ago, domestic electricity tariffs and petrol prices rose by around 30 per cent each.’
Mr Heng said inflation expectations here are ‘well anchored’ and so a wage-price spiral is unlikely. He said the current monetary policy remains appropriate, which is seen as a hint that the central bank will not allow faster currency appreciation at the next policy review in October.
As for economic growth, he reiterated the official 4 to 6 per cent estimate.
DBS Bank economist Irvin Seah said the new forecast is realistic, but is less sanguine about commercial rentals: ‘Firms have told me that landlords continue to have a ‘take it or leave it’ stance when discussing rentals.’
Source : Straits Times - 25 Jul 2008
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