Singapore Dec CPI +5.5pc y/y, matches forecast

SINGAPORE: Singapore's inflation rose 5.5 percent in December from a year ago, the Department of Statistics said on Wednesday, in line with the consensus forecast of economists polled by Reuters.

For the whole of last year, inflation was 5.2 percent, higher than the official forecast of around 5 percent.

On a month-on-month seasonally adjusted basis, the consumer price index rose 0.7 percent in December from November.

The central bank's core inflation measure rose 0.2 percent month-on-month and 2.6 percent year-on-year. Singapore's core inflation excludes the cost of accommodation and private road transport, which are strongly influenced by government policy.

Looking ahead, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in a joint statement that year-on-year inflation will likely remain elevated over the next few months.

"Private road transport cost is expected to remain firm in view of the tight COE supply (while) MAS Core Inflation will likely face some upward pressure in the next few months due to the ongoing pass-through of earlier cost increases," MAS and MTI said.

COMMENTARY

SONG SENG WUN, REGIONAL ECONOMIST AT CIMB

"The underlying core figures that the MAS is focusing on is less threatening than the headline inflation."

"(But) while underlying core inflation, as measured by the 2.6 percent is half the pace of the headline inflation, the trend has been slightly picking up from around 2 percent at the beginning of the year to ending the year at 2.6 percent."

"We will see whether in the next couple of months if the core inflation comes off in-line with the moderation in growth momentum. If we can quickly return to a core inflation level of 1.5 to 2 percent, I think we may see the MAS loosening further."

CHESTER LIAW, FX STRATEGIST AT FORECAST PTE LTD

"Although we do not expect CPI to come in higher than 4pc y/y the next month, any easing off in percentage terms has more to do with a high base effect than anything else and the month-on-month number could be more meaningful."

"We do not expect MAS to adopt a more hawkish stance in April to combat price increases as most of it are still driven by domestic influences."

WU KUN LUNG, ECONOMIST, CREDIT SUISSE

"Going forward, in Q1 we expect inflation to slow to an average of 4.3 percent, but it will only fall more meaningfully in the second half of the year. We expect it to fall below 3 percent in the second half."

"COE (car certificate of entitlement) prices have come off quite a bit, so that should mean the transport CPI will fall in January and February. That will help to lower inflation in Q1."

"We think that Singapore's monetary policy will remain on a mild appreciation trend. In April, the most likely scenario is that the MAS (Monetary Authority of Singapore) will keep its policy stance unchanged."

MARKET REACTION

The Singapore dollar traded around S$1.2661 against the US dollar around 0536 GMT, slightly stronger than S$1.2663 just before the release of CPI data.

The benchmark FTSE ST Index was up 0.9 percent, edging from just before the data release.