Singapore’s inflation held steady at -0.3% y/y in March – stronger than expectations – while core inflation fell back to 1.0% from 1.3%, marginally weaker (headline – consensus: -0.5%; core – consensus : 1.1%). The main driver of the miss in headline inflation was an unexpected easing in private road transport deflation.The fall in core was due mostly to a further easing in food inflation. Services inflation was broadly stable, except for health, which fell into negative territory on the back of government subsidies. Overall, the headline inflation is likely to remain negative in Q2, while core is also likely to move further lower in the near-term due to healthcare subsidies and the pass-through of lower oil to electricity tariffs. However, core services inflation should remain sticky given ongoing tightness in the labor market. According to Barclays. the tone of the April MPS is viewed as reducing further the risk of an additional policy change by the MAS in October. It believes additional changes to the SGD NEER policy band would only occur in the event of a significant darkening in the growth outlook.
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