June inflation lowest since March 2017
Analysts predict MAS policy changes in October
A fall in inflation last month has heightened expectations that policy changes loom for the Sing dollar in October.
Core inflation - which strips out private road transport and accommodation costs - came in at 1.2 per cent last month. It was down from 1.3 per cent in May and the lowest since March 2017.
The decline was due to slower rises in prices in the service and retail sectors as well as a steeper decline in electricity and gas costs.
Overall inflation eased as well, down from 0.9 per cent in May to 0.6 per cent last month, ending a four-month streak heading up, the Trade and Industry Ministry (MTI) and Monetary Authority of Singapore (MAS) noted yesterday.
This was due to more moderate price rises for private road transport, services and retail goods, as well as a larger decline in the costs of energy and accommodation.
The inflation numbers and a sharp slowdown in growth led economists to raise their bets on a monetary policy easing by the MAS in October.
Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said: "The MAS will likely ease to a neutral or zero bias (from a current modest and gradual appreciation stance) at the October meeting, given the risk of a technical recession and subdued inflation."
A neutral or zero bias means setting the rate of the dollar's appreciation to zero per cent against a basket of currencies.
United Overseas Bank economist Barnabas Gan added: "The lower-than-expected rise in consumer prices for June underpins an increasingly pallid inflation environment into the rest of 2019."
The MAS and MTI maintained their inflation outlook yesterday, saying external prices, including for oil, are likely to be benign for the rest of the year.
They also noted that the job market here is holding up, but wage increases will likely be moderate and not at a level that will fuel a spike in inflation given slower growth, uncertainties in the global economy and the continuing restraining effects of MAS monetary policy tightening last year.
Private road transport could be a bit pricier this year, while accommodation costs are likely to decline at a slower pace.
Core inflation is expected to come in near the mid-point of the forecast range of 1 per cent to 2 per cent, while overall inflation is expected to average 0.5 per cent to 1.5 per cent.
The cost of private road transport last month rose by 0.2 per cent year on year, moderating from the 1.5 per cent increase in May. Services inflation eased to 1.7 per cent.
The overall cost of retail items rose 0.4 per cent. Electricity and gas prices declined by 4.8 per cent. Accommodation costs fell at a slightly faster pace of 1.1 per cent. Food inflation was 1.4 per cent.
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