Singapore: Inflation unexpectedly moderates in October
November 24, 2010
In October, consumer prices increased 0.5% over the previous month, which was above the 0.1% rise registered in September. The monthly reading was driven by higher prices for housing (+0.5% month-on-month) and transport (+0.8% mom), which partially offset lower prices for communication (-0.8% mom). Despite the monthly price increase, annual inflation stepped down to 3.5%, after having reached the highest level observed since the end of 2008 (September: 3.7% year-on-year). The moderation seen in October surprised market analysts, who had expected annual inflation to remain unchanged at 3.7%. Annual average inflation rose for the seventh consecutive month in October, increasing to 2.0% from 1.6% in September. The Monetary Authority of Singapore (MAS) conducts its monetary policy through the management of the exchange rate, instead of using interest rates. Monetary authorities last tightened their policy stance on 14 October, when they announced they would widen the Singapore dollar policy trading band and increase its slope without changing the level at which the band is centered. Monetary authorities expect inflation to range between 2.5% and 3.5% this year. Consensus Forecast panellists anticipate inflation to average 2.9% this year. For 2011, the panel expects average inflation to remain unchanged at 2.9%, which is up 0.1 percentage points from last month's estimate.