Inflation rises to highest level since July 2023 in May

Inflation rose to 2.0% in May, up from April’s 1.8%. May's reading represented the highest inflation rate since July 2023. Looking at the details of the release, prices for transportation, housing and utilities, and information and communication rose at quicker paces in May compared to the previous month. Meanwhile, food costs grew at a softer pace. The trend pointed down slightly, with annual average inflation coming in at 1.8% in May (April: 1.9%). Finally, consumer prices increased a seasonally adjusted 0.30% in May over the previous month, picking up from the 0.15% increase logged in April.

United Overseas Bank analysts Julia Goh and Loke Siew Ting commented on the outlook for inflation and monetary policy: “Going forward, we expect headline inflation to trend higher and surpass 2.0% levels for the rest of the year as the government kicked off its targeted diesel subsidy mechanism on 10 June and as base effects set in. This will bring the full-year inflation rate to an average of 2.6% for this year (vs 2023: 2.5%), barring any further subsidy rationalization particularly for RON95 fuel and essential food items such as chicken, sugar and rice prices in 2H24, as well as stronger-thanexpected pass through effects from the removal of blanket subsidy for diesel to targeted mechanism.”

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