Private-sector Economists Suggest Monetary Authority of Singapore May Act in October Following July Inflation Data
Singapore’s core inflation has taken a more favorable turn, dipping to 2.5% in July, marking its lowest point in over two years. This marks a significant deceleration from June’s rate of 2.9%, a change that has led some private-sector economists to predict that the Monetary Authority of Singapore (MAS) may ease its monetary policy in its next scheduled meeting in October.
Core inflation, which excludes accommodation and private transport costs, is seen as a more reliable measure of underlying price pressures within an economy. The July figure not only undershot economists’ expectations but also came in lower than the prior month’s rate, signaling that price increases in many sectors of the economy are moderating. This drop to 2.5% represents the lowest core inflation since February 2022, when the rate was recorded at 2.2%.
Meanwhile, Singapore’s headline inflation, which includes all categories of goods and services, remained steady at 2.4%, unchanged from June. This figure was slightly below the median forecast of 2.5% predicted by economists surveyed by Bloomberg. The stability in the headline inflation rate suggests that while some pressures, such as rising private transport costs, continue to contribute to inflation, the overall economic price growth is still contained, partly due to a decline in accommodation costs.
The primary driver behind the easing of core inflation was the drop in services costs. This is an important factor for policymakers to consider as it often reflects changes in consumer behavior and broader economic conditions. The cooling inflation in services, particularly in areas like dining and personal care, suggests that price increases are starting to stabilize, which could have positive implications for households’ purchasing power moving forward.
Economists have been closely monitoring the latest inflation trends as they weigh the possibility of policy adjustments. With inflationary pressures showing signs of easing, some believe that the MAS could decide to adopt a more accommodative stance to stimulate the economy. By easing monetary policy, the central bank could lower borrowing costs, which in turn may boost consumption and investment—key drivers of economic growth.
The possible policy shift comes at a time when Singapore’s economy has been facing challenges, including a global slowdown and shifting domestic demand. However, the recent inflation data presents an opportunity for the MAS to act cautiously, striking a balance between supporting growth and maintaining control over price stability.
Economists are now closely watching the upcoming October meeting of the MAS for any signals of such policy easing. Should this occur, it would mark a shift from the tight monetary policy stance that has been in place over the past year, aimed at curbing inflationary pressures. The move would also align with a broader global trend where central banks, after aggressively tightening policies in previous years, are starting to take a more dovish approach as inflation moderates.
In sum, July’s inflation data presents a promising sign that Singapore’s economy is stabilizing, with the potential for more targeted monetary policy interventions in the coming months. The outlook for inflation and economic growth will likely remain a key topic of discussion as Singapore navigates both local and global economic uncertainties.
